CROATIA osiguranje d.d. Annual report and financial statements for

CROATIA osiguranje d.d.

Annual report and financial statements

for 2015

Croatia osiguranje d.d. Annual Report and financial statements for 2015

Content Annual Report of the Company and the Group for 2015 .............................................. I Consolidated and separate financial statements for 2015 .......................................... II Supplementary statements prescribed by the Ordinance of the Croatian Financial Services Supervisory Agency ....................................................................................... III


Croatia osiguranje d.d.

Annual Report of the Company and the Group for 2015


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The insurance market of the Republic of Croatian in 2015 During 2015 the insurance market has been very active and has recorded a total premium growth of 1.9%, or HRK 165m, which represents a significant change compared to the previous year in which the premium fell by 5.7%. A deeper look into the structure of the premium speaks volumes about turbulent markets and significantly different trends between different types of insurance. So we can say that the past year was a year of growth in life insurance with an increase of 11.3%, or HRK 297m. At the same time non-life insurance premium declined by 2.2%, or HRK 133m. Life insurance has achieved a growth in almost all groups of insurance, with the biggest growth happening in annuity insurance in the amount of 203.3%, or HRK 41m, and in life or annuity insurance where the policyholder bears the investment risk with an increase of 77.1%, or HRK 105m. Total non-life insurance premiums amounted to HRK 5.79 billion, wherein dominate insurance related to motor vehicles – insurance for motor vehicles with a 36.3% share of the total premium and motor hull insurance with a 12.3% share. The main cause of the previously mentioned decline of premium is in MTPL, where total premiums fell by 14.8%, or HRK 348m, which is less than in 2014 when the drop was 20.1%. At the same time the number of policies sold increased by 2.7% which shows an upward trend in the number policies (the increase in 2014 was 1.6%). The reason for the fall of the total premium is the price drop as a result of liberalization of the MTPL market. The majority of other types of of non-life insurance premiums have increased, primarily liability insurance with a 25% growth (HRK 75m) and risk insurance with a 10.7% growth (HRK 69m). CROATIA osiguranje dd, Miramarska 22, Zagreb (hereinafter: the Company), still holds the largest share of the Croatian insurance market, with a share in the total written premium of 26.5%. Together with its subsidiary Croatia zdravstveno osiguranje, the Group in Croatia, after many years of experiencing a decline in market share, managed to reverse the negative trend and recorded a growth of 0.4 percentage points and at the end of 2015 the total share was 29%.

Operating results and financial position of the Company and the Group Company The Company during 2015 completed the first phase of restructuring that resulted in the rationalization and stabilization of business and changed the ratio of employees in sales and administration, with the trend of stronger orientation towards sales in the future. The continued transformation of the Company towards long-term sustainability and the preservation and strengthening of its market position will be focused on further development of products, services and its availability to existing and future customers and on improving business efficiency and reducing costs. The results of the restructuring are visible in financial results. In 2015 Croatia osiguranje d.d. reported profit before tax in the amount of HRK 67.1m (profit after tax of HRK 46.8m). Earned premiums amounted to HRK 2,056.5 million. That is an increase of 1.1%. The total gross written premium (before adjustments by the net increase in the provision for premium receivables and related write-offs) increased by 1.2% and amounted to HRK 2,307.9m. Written premium in non-life insurance amounted to HRK 1,794.4m, which is a decrease of 6.2% compared to the same period last year.


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The largest decline is still recorded in MTPL as a result of a price drop due to market liberalization. Written premium in life insurance amounted to HRK 513.5m and has increased by 40.1% as a result of the rapid development of the sales network, mainly bank channel. In the non-life and life insurance investment business, revenues were realised in the amount of HRK 356.0m which is 5.9% more than in 2014. Finance costs in 2015 are under the influence of a decrease in share prices of shipping companies dealing with bulk cargo, amounting to HRK 158.9m. Gross paid claims amounted to HRK 1,333.5 million representing a decrease of 5% compared to the same period in 2014. Acquisition costs and administrative expenses amounted to a total of HRK 812.8mi, recording a decrease of 25.1% compared to the same period last year due to the rationalization of total operating costs. The increase in acquisition costs and the reduction of administration cost is the result of further business reorganization. The following is a summary of key performance indicators in 2015:

Key performance indicators 31 Dec. 2014 31 Dec.

2015 Change in

p.p.

Claims ratio (non-life)* 60.9% 58.7% -2.2%

Cost ratio (non-life)** 58.2% 45.4% -12.8%

Combined ratio (non-life) 119.1% 104.1% -15.0%

Capital adequacy –non-life 345.7% 345.4% -0.3%

Capital adequacy -life 161.0% 146.9% -14.1% * Claims ratio = (Income from commissions and fees + Other insurance-technical income + Claims incurred + Change in mathematical and other technical provisions + Change in special reserves for insurances concerning life insurance group where the policyholder bears the investment risk + Cost for premium returns + Other technical expenses) / Earned premiums ** Cost ratio = Acquisition costs and administrative expenses / Earned premiums

Combined ratio, as the most important indicator of success in non-life insurance in 2015, amounted to 104.1%, which is 15 percentage points better than in the same period of 2014. The claims ratio is better by 2.2 percentage points and amounted to 58.7%. The rationalisation of total operating costs and the reduction in operating expenses had the largest impact on the improvement in cost ratio by 12.8 percentage points (in 2015 amounted to 45.4%). The Company is one of the most solvent companies in Croatia, with a capital adequacy ratio of 345.4% in non-life insurance and 146.9% in life insurance. Total assets of the Company as at 31 December 2015 amount to HRK 8.4 billion, which represents an increase of 1.6% compared to 31 Dec 2014.


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The structure of non-life insurance investments

33,0%37,5%

18,0%17,4%

3,6%0,7%

32,3% 32,2%

13,1% 12,3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

31 Dec 2014 31 Dec 2015

Non-life insurance investment structure

Comparison for 31 December 2014 - 31 December 2015

Debt securities Equitiy securities Investment funds

Loans and receivables Investment property


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The structure of life insurance investments

The calculated technical provision in the reporting period amounted to HRK 5.8 billion which represents an increase by 2.6% in comparison to calculated technical provisions as at 31 December 2014.

77,7%82,3%

1,3% 0,4%3,0%0,5%

18,0% 16,7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

31 Dec 2014 31 Dec 2015

Life insurance investment structure

Comparison for 31 December 2014 - 31 December 2015

Loans and receivables Investment funds Equitiy securities Debt securities


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Group

In 2015 the CROATIA osiguranje d.d. Group (hereinafter: the Group) achieved consolidated profit after tax and non-controlling interest in the amount of HRK 109.8m. The total gross written premium (before adjustments by the net increase in the provision for premium receivables and related write-offs ) on Group level in 2015 amounted to HRK 2,968.2m which represents an increase by 3.5%. Gross written premium of non-life insurance amounted to HRK 2,366.3m which represents a decrease by 2.6%, while gross written premium of life insurance amounted to HRK 602.0m which represents an increase by 36.8%.

Earned premiums in the reporting period amounted to HRK 2,687.3 million which represents an increase by 3.2% compared to the same period of last year.

In the non-life and life insurance investment business, the Group generated income from investments in the amount of HRK 454.5m which represents an increase by 37.9%.

Gross claims in 2015 amounted to HRK 1,653.2m which is a decrease of 1.1% compared to the same period of last year. Non-life insurance recorded a decrease in gross claims of 2.0%., while life insurance recorded an increase of gross claims by 2.6% compared to the same period of last year.

Acquisition costs and administrative expenses amounted to a total of HRK 1,172.4m and decreased by 16.8%, due to the rationalization of total operating costs. The increase in acquisition costs and reduction in cost of administration is the result of, among other things, business reorganization.

Finance costs amounted to HRK 150.1m which is a decrease by 59.6% compared to the same period in 2014.

Total assets of the Group as at 31 December 2015 amount to HRK 9.8 billion which represents an increase by 2.1% in comparison to 31 December 2014.

The calculated technical provisions amounted to HRK 6.7 billion which represents an increase by 3.5% in comparison to the calculated technical provisions as at 31 December 2014.


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Major business events in the reporting period The Company has on 2 March 2015 entered into a court settlement with the Republic of Croatia related to the resolution of relationships in several court cases, whereby it was concluded that as at 31 December 2012 the Republic of Croatia owes to the Company the amount of HRK 20.4m together with penalty interest running from 1 January 2013 until payment, resulting in an increase of other operating income in the same amount. In the period from 5 May 2015 until 3 June 2015, the Company carried out the voluntary public offer to purchase shares of Croatia osiguranje d.d. Ljubuški in accordance with the Takeover Law of the Federation of Bosnia and Herzegovina (FBiH Official Gazette No. 07/06) and the decision of the Securities Commission of the Federation of Bosnia and Herzegovina. In the voluntary public offer, 11,031 shares were purchased for the amount of HRK 11.3m, which represents 36.5943% of the total issued shares of the issuer, and thus Croatia Osiguranje increased equity of the issuer from 52.0505% to 88.6445%. On 7 October 2015 the recapitalization of Croatia Osiguranje Ljubuski, in accordance with the Decision on capital increase and acquisition of shares, was sucessfully completed. By paying HRK 31.1m for 29,980 shares, the Company increased its equity in Croatia Ljubuški from 88.6445%. to 94.1564%. Capital contribution was carried out in order to preserve capital adequacy and create preconditions for the further operations. )In accordance with the Management Board’s decision to increase the share owned by the subsidiary Croatia osiguranje d.d. Ljubuški to the level of 100% of the share capital, in the period from 22 December to 28 December 2015 105 shares were purchased thereby increasing the Company’s share in equity from 94.1564% to 94.3308%. On 18 June 2015, the Company adopted the Decision on capital increase and acquisition of shares of CROATIA Sigurimi sh.a., Prishtina, according to which the Company paid for and registered 25,000 new shares of the company in the amount of EUR 2.5 million. Capital contribution was carried out in order to preserve capital adequacy and create preconditions for further operations.

Significant events after the end of the financial year There were no significant events after the balance sheet date


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Expected development in the future In the next three years the Company will further strengthen its leading position in the Croatian insurance market, and develop the companies within the Group. By further upgrading our business model and operational excellence, conditions for sustainable and profitable growth will be created. At the same time, as a market leader, we will work on raising awareness of insurance products and the benefits they bring to customers. In the coming period, we expect a reversal of negative economic trends that in previous periods affected the potential development of the insurance market and its movement as a whole. This will create a positive business environment and conditions for the convergence of markets towards more developed markets of other EU countries. In the period up to 2018, the focus of the Company and the Group will be on: • Exceptional focus on the market and customers in order to meet their needs • Development of new products which will provide security to customers and follow relevant trends • Operational excellence in order to continue providing quality and prompt services • Digitization of business and introduction of new technologies in order to enhance competitiveness • Optimisation of our operations in accordance with the requirements of Solvency 2 regulations which came into force at the beginning of 2016 • Further growth and development of companies operating within the Group in Croatia and the region in order to strengthen their market positions. Through the implementation of the above activities, we want to create added value for our customers and shareholders and maintain the quality and recognition of the Croatia osiguranje brand. This will ensure the continuation of the positive trend that started in 2015 which primarily affect further strengthening of the market share and better business results both in Croatia and in the region.

Research and development activities Customer focus and innovation are the values of the Group that underlie research activities and new product development. We conduct market research activities regularly with the goal of better understanding existing market needs and creating products that will adequately respond to them. In parallel, we are monitoring trends and developments in highly developed insurance markets with a focus on EU. In this way we ensure that our program of product development includes relevant world products in a way that is tailored to the needs of clients in Croatia. During product development focus is put on creating products with quality insurance coverage and on the service that we provide as a whole. Special emphasis is placed on quality and available service which will adequately cover risks with which our clients are faced. We use the latest technological solutions as well as a number of innovations to ensure customer satisfaction.


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Company subsidiaries

Subsidiary name Registered office /address

Croatia osiguranje d.d. OSIJEK branch office Trg Lj.Gaja 1, Osijek

Croatia osiguranje d.d. PULA branch office Marulićeva ulica 1, Pula

Croatia osiguranje d.d. RIJEKA branch office Korzo 39, Rijeka

Croatia osiguranje d.d. SLAVONSKI BROD branch office Ivana Mažuranića 14, Slavonski Brod

Croatia osiguranje d.d. SPLIT branch office Trg Hrvatske bratske zajednice 8, Split

Croatia osiguranje d.d. VARAŽDIN branch office Kapucinski Trg 14, Varaždin

Croatia osiguranje d.d. ZABOK branch office Matije Gupca 13, Zabok

Croatia osiguranje d.d. ZADAR branch office Obala Kneza Branimira 20, Zadar

Croatia osiguranje d.d. ZAGREB branch office Trg Bana Josipa Jelačića 13, Zagreb

Croatia osiguranje d.d. DUBROVNIK branch office Dr.Ante Starčevića 9, Dubrovnik

Croatia osiguranje d.d. ZAGREBAČKI PRSTEN branch office Trg Kralja Tomislava 16, Velika Gorica

Croatia osiguranje d.d. ZAGREB II branch office Trg Bana Josipa Jelačića 13, Zagreb

Croatia osiguranje d.d. VINKOVCI branch office Vladimira Nazora 4, Vinkovci

Croatia osiguranje d.d. ŠIBENIK branch office Stjepana Radića 9, Šibenik

Croatia osiguranje d.d. branch office for corporate clients Miramarska 22, 10000 Zagreb

Financial risk management Financial risk management is described in Note 2.37. Consolidated and separate financial statements for 2015.

Corporate Governance Statement The Company applies the Code of Corporate Governance, which was jointly adopted by the Croatian Financial Services Supervisory Agency (HANFA) and Zagreb Stock Exchange and is available on their web sites. By applying the provisions of the Corporate Governance Code, Rules of the Zagreb Stock Exchange (which are available on its website), the Companies Act (Official Gazette 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 125/11, 152/11, 111/12, 68/13, 110/15) and the Capital Market Act (Official Gazette 88/08, 146/08, 74/09, 54/13, 159/13, 18/15, 110/15), the Company makes its operations and operating results transparent and accessible to the public. All explanations and possible deviations from the above rules are published by the Company in the Corporate Governance Code Annual Questionnairewhich is, for year 2015, publicly available on the website of the Company (www.crosig.hr) and on the Internet website of the Zagreb Stock Exchange. The system of internal controls in financial reporting ensures reasonable accuracy of financial statements in their presentation of financial results and the financial position of the Company, and their compliance with International Financial Reporting Standards.

The accounting policies of the Company represent the principles, rules and practices that the Company applies in preparing and presenting financial statements. The accounting policies of the Company are defined by a special Rulebook. Significant accounting policies are disclosed in the Company's financial statements.


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The internal accounting control procedures include the control of formal, substantive and computational accuracy of an accounting document:

- Control of formal accuracy of an accounting document determines whether the document has been prepared in accordance with applicable regulations,

- Substantive control of an accounting document determines whether the business changes actually occurred and in the range as indicated,

- Control of computational accuracy of an accounting document means the control of mathematical operations (division, multiplication, addition and subtraction), based on which the results are obtained in the document.

The control of accounting documents is carried out in accordance with the Company's organizational structure and internal regulations by a person holding authorisation to do so as defined in the internal documents of the Company. The organizational chart is located on the internal network and is available to all employees. The control of formal, substantive and computational accuracy is confirmed by a physical and/or electronic signature of the person who has signed it. The Company has formed, in accordance with the provisions of the Insurance Act, an internal audit function at the highest organizational level which structurally answers directly to the Management Board and functionally to the Audit Committee and the Supervisory Board. Activities of the internal audit function are based on the work plans adopted by the Supervisory Board following a positive opinion of the Management Board. The internal audit function analyzes and evaluates the activities of the Company and provides expert advice, recommendations and advice on controls that should enable, among other things, the preparation of financial and other reports in accordance with applicable regulations and internal documents of the Company. The Company has established a risk management function in the form of an independent organizational unit directly answerable to the Management Board. This function established a risk management system consisting of a set of internal acts, procedures and methodologies to identify, estimate or measure, control and report risks. The risk management system is regularly being improved in accordance with best market practices and the requirements of external regulations. More detailed information on risk management can be found in the Notes to the financial statements. The Company, in accordance with the Insurance Act, has formed an effective compliance function which includes advising and reporting to the Management Board and Supervisory Board on Company compliance with the Insurance Act and other regulations governing the operation of an insurance company, carrying out an assessment of the possible impact of changes in the legal environment on Company operations , and determining and assessing compliance risk.

The Company has established an effective actuarial function that according to the Insurance Act coordinates, evaluates and ensures and gives its opinion to the Management Board and Supervisory Board about calculating technical provisions, the quality of data used in its evaluations, underwriting policy, reinsurance program and the implementation of risk management systems. The Company, in accordance with the Insurance Act, has appointed a certified actuary who verifies data, methods and underlying documents for the calculation of technical provisions according to accounting principles, and whether the technical provisions and premiums are designed to enable a permanent fulfillment of all Company obligations under the insurance or reinsurance contract regarding which the actuary provides an Opinion and Report to the Management Board and Supervisory Board.


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Significant direct holders of shares in the Company are:

Adris Grupa d.d. with a share of 61.3% and

the State Property Management Administration of the Republic of Croatia, with a share of 30.6%. On the Internet site of the Central Depository and Clearing Company there data are available on the 10 largest shareholders.

According to the current Articles of Association, the limitation of voting rights of shareholders or partial restriction of voting rights does not exist.

The Company's Management Board, according to the Articles of Association, consists of at least three (3) and a maximum of seven (7) members, one of whom is the President of the Management Board. The Supervisory Board determines in a decision the number of members; therefore, ina decision of the Supervisory Board of April 2015, the Company increased the number of Management Board members from three (3) to four (4) members. The Supervisory Board may appoint a member of the Management Board only after obtaining prior consent of the Croatian Financial Services Supervisory Agency in the procedure prescribed by the Insurance Act.

The right to appoint certain members of the Supervisory Board are set out in Article 24 of the Articles of Association in favor of the Republic of Croatia and employees of the Company. In accordance with the provisions of the Articles of Association, and in connection with the provision of Article 256, paragraph 3 of the Companies Act, the Republic of Croatia has the right to directly appoint two (2) members of the Supervisory Board, as long as it holds at least 25% of the Company's ordinary shares plus one ordinary share; however, as long as it holds at least 10% of ordinary shares of the Company, pursuant to the same statutory provisions, and in connection with the provision of Article 256 paragraph 3 of the Companies Act, the Republic of Croatia has the right to directly appoint one (1) member of the Supervisory Board. One (1) member of the Supervisory Board is appointed by the work council of the Company, i.e. by employees, through direct and secret elections in the manner prescribed for the election by the work council, and they are entitled to this right as long as the conditions prescribed by the Labour Act are met.

Articles of Association can be changed at the General Assembly in accordance with the provisions of the Companies Act, while the Supervisory Board is authorized to amend the provisions of the Articles of Association based on the decision of the General Assembly to the extent that the these amendments are of an editorial nature.

Members of the Management Board and the Supervisory Board are not shareholders of the Company.

The Company does not own treasury shares, and the General Assembly did not authorize the Company to acquire treasury shares.

The General Assembly, in accordance with the provisions of the Articles of Association, makes decisions by public voting at meetings convened usually by the Management Board and by the Supervisory Board only when it deems this necessary for the benefit of the Company. The powers of the General Assembly are governed by the Articles of Association and they do not deviate from the powers that the General Assembly of a public limited liability company has under the Companies Act. A shareholder is entitled to attend and vote at the General Assembly only if it informed the Management Board in writing of their participation no later than six days before the General Assembly.

The bodies of the Company are the General Assembly, the Supervisory Board and the Management Board.

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Consolidated and separate financial statements for 2015

CROATIA osiguranje d.d.

Consolidated and separate financial statements for 2015

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Content Consolidated and separate financial statements for 2015 ....................................................... 15 Responsibility for the financial statements ............................................................................. 19 Independent Auditor’s Report ............................................................................................... 20 Statement of comprehensive income ..................................................................................... 23 Statement of financial position .............................................................................................. 25 Statement of changes in equity .............................................................................................. 26 Statement of cash flows......................................................................................................... 28 Notes to the financial statements .......................................................................................... 30

1. GENERAL INFORMATION ON THE COMPANY ........................................................... 301.1. Legal framework, activities and employees ................................................................. 30 1.2. Company bodies ........................................................................................................... 30 1.3. Subsidiaries................................................................................................................... 31 1.4. Reclassification ............................................................................................................. 32

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................ 332.1. Statement of compliance and basis of presentation ................................................... 33 2.2. Basis of preparation ..................................................................................................... 33 2.3. Adoption of new and revised International Financial Reporting Standards ("IFRS") ... 33 2.4. Key estimates and uncertainty of estimates ................................................................ 35 2.5. Consolidation................................................................................................................ 36 2.6. Presentation currency .................................................................................................. 36 2.7. Foreign currency transactions ...................................................................................... 36 2.8. Gross written premiums ............................................................................................... 37 2.9. Investment income and expenses ................................................................................ 37 2.10. Claims incurred ............................................................................................................. 37 2.11. Operating expenses ...................................................................................................... 37 2.12. Intangible assets ........................................................................................................... 38 2.13. Property and equipment .............................................................................................. 38 2.14. Investment property .................................................................................................... 39 2.15. Investments in subsidiaries and associates .................................................................. 39 2.16. Financial instruments ................................................................................................... 39 2.17. Receivables ................................................................................................................... 44 2.18. Cash and cash equivalents and short-term deposits ................................................... 44 2.19. Income tax .................................................................................................................... 44 2.20. Equity ............................................................................................................................ 45 2.21. Technical provisions ..................................................................................................... 45 2.22. Technical provisions for life insurance where the policyholder bears the investment

risk ................................................................................................................................ 46 2.23. Reinsurance .................................................................................................................. 46 2.24. Liabilities and related assets under liability adequacy test .......................................... 46 2.25. Other liabilities ............................................................................................................. 46 2.26. Employee benefits and pension plans ......................................................................... 46 2.27. Provisions ..................................................................................................................... 47 2.28. Impairment ................................................................................................................... 47 2.29. Contingent liabilities and assets ................................................................................... 48 2.30. Events after the balance sheet date ............................................................................ 48 2.31. Earnings per share ........................................................................................................ 48 2.32. Classification of contracts ............................................................................................ 48 2.33. Segment reporting ....................................................................................................... 49 2.34. Main sources of uncertainty related to assessments and key accounting estimates in the application of the Group's accounting policies .................................................................. 49 2.35. Underwriting risk management ................................................................................... 50

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2.36. Principal assumptions that have the greatest effect on recognized assets, liabilities, income and expenses from insurance operations ................................................................... 55 2.37. Financial risk management .......................................................................................... 57 2.38. Capital risk management .............................................................................................. 71

3. Segment reporting .................................................................................................. 724. Premiums ............................................................................................................... 775. Commission and fee income .................................................................................... 786. Finance income ....................................................................................................... 79

6.1. Interest income ............................................................................................................ 79 6.2. Income from investment property ............................................................................... 79 6.3. Realised gains from financial assets ............................................................................. 80 6.4. Foreign exchange gains ................................................................................................ 80

7. Other operating income .......................................................................................... 808. Claims incurred, net of reinsurance ......................................................................... 819. Acquisition costs ..................................................................................................... 83

9.1. Commission .................................................................................................................. 83 9.2. Other acquisition costs ................................................................................................. 83

10. Administrative expenses ......................................................................................... 8410.1. Amortisation and depreciation .................................................................................... 84 10.2. Salaries, taxes and contributions from and on salaries ............................................... 84 10.3. Other administrative expenses .................................................................................... 85

11. Other operating expenses ....................................................................................... 8512. Finance costs .......................................................................................................... 86

12.1. Impairment of investments .......................................................................................... 86 12.2. Realised losses on investments .................................................................................... 86 12.3. Foreign exchange losses ............................................................................................... 87

13. Income tax .............................................................................................................. 8814. Earnings per share .................................................................................................. 8915. Intangible assets ..................................................................................................... 9016. Property and equipment ......................................................................................... 9217. Investment property ............................................................................................... 9418. Investments in subsidiaries, associates and participation in joint ventures ............... 95

18.1. Investments in subsidiaries and associates and participation in joint ventures for the Company .................................................................................................................................. 95 18.2. Investments in subsidiaries and associates and participation in joint ventures for the Group ...................................................................................................................................... 96 18.3. Movements in investments in subsidiaries, associates and participation in joint ventures.................................................................................................................................... 99

19. Financial assets ....................................................................................................... 9919.1. Overview of investments ........................................................................................... 100 19.2. Financial investments exposed to credit risk ............................................................. 104 19.3. Held-to-maturity investments .................................................................................... 105 19.4. Loans .......................................................................................................................... 105 19.5. Maturity analysis of assets covering mathematical provisions with liabilities from mathematical provision.......................................................................................................... 107 19.6. Maturity analysis of assets covering technical provisions except for mathematical provisions with insurance liabilities ....................................................................................... 109 19.7. Currency analysis of assets covering mathematical provisions with insurance contract liabilities ................................................................................................................................. 111 19.8. Currency analysis of assets covering technical provisions, except for mathematical provisions with insurance contract liabilities ......................................................................... 113 19.9. Analysis of interest rates repricing dates ................................................................... 115

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20. Reinsurance share in technical provisions ............................................................... 11721. Deferred tax assets ................................................................................................ 11822. Insurance contract and other receivables ............................................................... 121

22.1. Receivables from policyholders ................................................................................. 121 22.2. Receivables from coinsurance and reinsurance business .......................................... 121 22.3. Receivables from other insurance business ............................................................... 122 22.4. Receivables for returns on investment ...................................................................... 122 22.5. Other receivables ....................................................................................................... 123 22.6. Analysis of receivables from insurance business and other receivables by maturity.....

.................................................................................................................................... 124 22.7. Credit quality of receivables neither past due nor impaired .................................... 126 22.8. Analysis of receivables that are past due but not impaired by the number of days up to maturity ............................................................................................................................. 128 22.9. Movements in impairment of receivables ................................................................. 129

23. Cash and cash equivalents ...................................................................................... 13024. Equity .................................................................................................................... 130

24.1. Share capital ............................................................................................................... 130 24.2. Reserves ..................................................................................................................... 132 24.3. Fair value reserve ....................................................................................................... 133

25. Technical provisions ............................................................................................... 13425.1. Movements in reported but not settled claims, gross ............................................... 134 25.2. Movements in incurred but not reported claims ....................................................... 135 25.3. Movements in provisions for unearned premiums.................................................... 135 25.4. Movements in mathematical provisions for insurance, gross ................................... 136 25.5. Movements in technical provisions for life insurance where the policyholder bears the investment risk, gross ............................................................................................................ 136 25.6. Analysis of movements in claims provisions (RBNS and IBNR) for non-life insurance ....

.................................................................................................................................... 137 25.7. Maturity of gross technical provisions ....................................................................... 138 25.8. Analysis of claim (loss) ratios, cost ratios and combined ratios for the Company .... 139 25.9. Analysis of assets covering mathematical provisions with insurance contract liabilities for the Company ................................................................................................................... 140 25.10. Analysis of assets covering technical provisions, except formathematical provisions with insurance contract liabilities for the Company ............................................................. 141

26. Provisions .............................................................................................................. 14227. Financial liabilities ................................................................................................. 143

27.1. Liabilities to banks and other financial institutions ................................................... 143 27.2. Maturity of long-term liabilities ................................................................................. 143

28. Insurance contract and other liabilities and deferred income .................................. 14429. Off-balance-sheet items ......................................................................................... 14630. Transactions with related parties ........................................................................... 14631. Contingent liabilities .............................................................................................. 14932. Commitments ........................................................................................................ 14933. Financial statements audit ..................................................................................... 149

Supplementary statements prescribed by the Ordinance of the Croatian Financial Services Supervisory Agency .............................................................................................................. 150 Reconciliation of the financial statements and supplementary statements for the Croatian Financial Services Supervisory Agency ................................................................................... 168 Additional notes at the request of the Regulator ................................................................... 177

PricewaterhouseCoopers d.o.o., Ulica kneza Ljudevita Posavskog 31, 10000 Zagreb, Croatia T: +385 (1) 6328 888, F:+385 (1) 6111 556, www.pwc.hr Commercial Court in Zagreb, No. Tt-99/7257-2, Reg. No.: 080238978; Company ID No.: 81744835353; Founding capital: HRK 1,810,000.00, paid in full; Management Board: Hrvoje Zgombic, President; J. M. Gasparac, Member; S. Dusic, Member; T. Macasovic, Member; giro-account: Raiffeisenbank Austria d.d., Petrinjska 59, Zagreb, IBAN: HR8124840081105514875.

Independent Auditor’s Report

To the Shareholders and Management Board of Croatia osiguranje d.d. , Zagreb

We have audited the accompanying consolidated financial statements of Croatia osiguranje d.d. and its subsidiaries (”the Group) and the financial statements of Croatia osiguranje d.d. (”the Company), which comprise the statement of financial position as at 31 December 2015 and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes comprising a summary of significant accounting policies and other explanatory information.

Management Board’s responsibility for the financial statements

The Management Board is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and for such internal controls that the Management Board determines are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responisibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The selected procedures depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management Board, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

21

Basis for Qualified Opinion – Group

Based on our audit for the year ended 31 December 2014, we issued a qualified opinion concerning the absence of adequate valuations of investment properties and property used for own purposes as at 31 December 2013. Therefore, as stated in the auditor’s opinion for the year 2014, we were not able to determine whether any adjustments were necessary to the carrying values of investment property and property used for own purposes as at 31 December 2013 and 1 January 2014 respectively, or to the loss for the year reported in the statement of comprehensive income of the Group for the year ended 31 December 2014. During 2014, the Group carried out new valuations. Consequently, as at 31 December 2014, the carrying value of investment property decreased by HRK 146,472 thousand, while deferred tax assets increased by HRK 29,294 thousand, and loss after tax increased by HRK 117,178 thousand. Furthermore, the value of property used for own purposes decreased by HRK 193,654 thousand, revaluation reserves decreased by HRK 70,827 thousand, and deferred tax liabilities decreased by HRK 17,707 thousand, while deferred tax assets increased by HRK 21,024 thousand, and loss after tax increased by HRK 84,096 thousand for the loss incurred on fair valuation. This Qualified Opinion has no impact on the Group's financial statements for the year ended 31 December 2015, except for the part that results in the inability of adequate comparability of results in 2015 with results in 2014.

Basis for Qualified Opinion - Company

Based on our audit for the year ended 31 December 2014, we issued a qualified opinion concerning the absence of adequate valuations of investment properties and property used for own purposes as at 31 December 2013. Therefore, as stated in the auditor’s opinion for the year 2014, we were not able to determine whether any adjustments were necessary to the carrying values of investment property and property used for own purposes as at 31 December 2013 and 1 January 2014 respectively, or to the loss for the year reported in the statement of comprehensive income of the Company for the year ended 31 December 2014. During 2014, the Company carried out new valuations. Consequently, as at 31 December 2014, the carrying value of investment property decreased by HRK 144,422 thousand kuna, while deferred tax assets increased by HRK 28,884 thousand, and loss after tax increased by HRK 115,538 thousand. Furthermore, the value of of property used for own purposes decreased by HRK 181,713 thousand, revaluation reserves decreased by HRK 61,274 thousand, and deferred tax liabilities decreased by HRK 15,319 thousand, while deferred tax assets increased by HRK 21,024 thousand, and loss after tax increased by HRK 84,096 thousand for the loss incurred on fair valuation. This Qualified Opinion has no impact on the Company's financial statements for the year ended 31 December 2015, except for the part that results in the inability of adequate comparability of results in 2015 with results in 2014.

Qualified Opinion

In our opinion, except for the possible effects mentioned above that affect the comparability of operating results described under section Basis for Qualified Opinion for the Group and the Company, the financial statements present fairly, in all material respects, the financial position of the Group and the Company as at 31 December 2015, their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

CROATIA osiguranje d.d., Zagreb

23

Statement of comprehensive income for 2015

Company Company

Group Group

Note 2015 2014

2015 2014

in HRK'000 in HRK'000


Gross written premiums 4 2,301,445 2,229,302

2,959,619 2,811,392

Premiums ceded to reinsurance 4 (258,784) (310,048)

(278,865) (272,736)

───── ─────

───── ─────

Written premiums, net of reinsurance 4 2,042,661 1,919,254

2,680,754 2,538,656

Change in gross provisions for unearned premiums 4 22,062 122,654

(3,709) 76,977

Change in provisions for unearned premiums, reinsurance share 4 (8,266)

(7,785)

10,300

(12,065)

───── ─────

───── ─────

Earned premiums, net of reinsurance 4 2,056,457 2,034,123

2,687,345 2,603,568

Commission and fee income 5 33,328 22,450

37,170 35,896

Finance income 6 356,018 336,124

454,493 422,644

Other operating income 7 55,927 68,791

155,349 159,585

───── ─────

───── ─────

Net operating income 2,501,730 2,461,488

3,334,357 3,221,693

───── ─────

───── ─────

Claims incurred 8 (1,503,473) (1,573,404)

(1,878,197) (1,898,487)

Reinsurance share in claims incurred 8 79,665 168,276

81,628 114,506

───── ─────

───── ─────

Claims incurred, net of reinsurance (1,423,808) (1,405,128)

(1,796,569) (1,783,981)

───── ─────

───── ─────

Acquisition costs 9 (378,874) (368,693)

(495,423) (486,622)

Administrative expenses 10 (433,916) (717,295)

(676,961) (922,949)

Other operating expenses 11 (39,132) (170,161)

(74,019) (212,751)

Finance costs 12 (158,946) (313,633)

(150,101) (371,970)

───── ─────

───── ─────

Profit/(loss) before tax 67,054 (513,422)

141,284 (556,580)

Income tax 13 (20,283) 100,577

(31,533) 90,888

───── ─────

───── ─────

Profit/(loss) for the year 46,771 (412,845)

109,751 (465,692)

════ ════

════ ════

The notes on pages 30 to 149 are an integral part of these financial statements.


24

Statement of comprehensive income (continued) for 2015 Continued:

Company Company

Group Group

Note 2015

Restated 2014

2015 Restated

2014

in HRK'000

in HRK'000

in HRK'000

in HRK'000

Total comprehensive income/(loss) for the year

Items that will not be recognised in profit or loss

Change in fair value of business property 96 (61,274)

57 (74,980)

Items that may be subsequently recognised in profit or loss

Change in fair value of available-for-sale financial assets, net of realised amounts and net of deferred tax

(28,569) 98,476

(26,657) 111,048

Foreign currency differences

-

- 643

(6,968)

───── ─────

───── ─────

Total other comprehensive (loss)/income for the year (28,473) 37,202

(25,957) 29,100

───── ───── ───── ─────

Total comprehensive income/(loss) for the year 18,298 (375,643) 83,794 (436,592)

════ ════

════ ════

Profit/(loss) attributable to:

- Company's shareholders 46,771 (412,845)

110,402 (466,073)

- non-controlling interest - -

(651) 381

───── ─────

───── ─────

46,771 (412,845)

109,751 (465,692)

════ ════

════ ════

Total comprehensive income/(loss) attributable to:

- Company's shareholders 18,298 (375,643) 84,532 (431,240)

- non-controlling interest - - (738) (5,352)

───── ───── ───── ─────

18,298 (375,643) 83,794 (436,592)

════ ════ ════ ════

Earnings/(loss) per share attributable to the Company's shareholders

───── ─────

Basic and diluted loss per share 14 260,72 (1,366,37)

════ ════



25

Statement of financial position as at 31 December 2015

Company Company Group Group

Note 31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014

in HRK'000 in HRK'000 in HRK'000 in HRK'000

Assets

Intangible assets 15 14,334 10,828 25,509 44,968

Property and equipment 16 732,191 738,333 943,580 976,020

Investment property 17 479,755 514,715 718,459 751,402

Investments in subsidiaries, associates and participation in joint ventures

18 421,416 421,371 81,653 71,403

Held-to-maturity investments 19 2,085,668 2,243,583 2,315,482 2,486,919

Available-for-sale financial assets 19 1,608,197 1,034,523 2,002,521 1,257,360

Financial assets at fair value through profit or loss

19 105,805 290,774 213,997 440,266

Loans and receivables 19 1,661,522 1,675,682 2,062,811 2,141,404

Reinsurance share in technical provisions

20 306,769 339,416 163,674 144,852

Deferred tax assets 21 91,070 103,950 105,128 118,191

Insurance contract and other receivables

22 799,626 756,026 1,004,503 971,605

Cash and cash equivalents 23 58,360 101,175 136,156 165,378

Total assets 8,364,713 8,230,376 9,773,473 9,569,768

Equity

Registered capital 24 601,576 601,576 601,576 601,576

Share premium 24 681,483 681,483 681,483 681,483

Reserves 24 395,535 513,007 395,535 514,746

Fair value reserve 24 141,970 171,581 199,457 246,803

Retained earnings/(accumulated loss) 24 63,496 (102,169) 398,494 151,563 Equity attributable to owners of the parent 1,884,060 1,865,478 2,276,545 2,196,171

Non-controlling interest - - 14,597 35,073

Total equity 1,884,060 1,865,478 2,291,142 2,231,244

Liabilities

Technical provisions 25 5,835,906 5,687,841 6,716,142 6,490,448

Provisions 26 107,510 248,491 128,888 261,133

Deferred tax liability 21 - - 23,855 31,619

Financial liabilities 27 - - 1,729 31,527 Insurance contract and other liabilities and deferred income

28 537,237 428,566 611,717 523,798

Total liabilities 6,480,653 6,364,898 7,482,331 7,338,525

Total equity and liabilities 8,364,713 8,230,376 9,773,473 9,569,769



26

Statement of changes in equity for 2015

Company Share

capital Share

premium Fair value

reserve Reserves

Retained earnings

Total equity

in HRK'000 in HRK'000 in HRK'000 in HRK'000 in HRK'000 in HRK'000

Balance at 1 January 2014 442,887 - 136,839 508,690 312,898 1,401,314

Total comprehensive income for the year

Change in fair value of business property - - (76,593) - - (76,593)

Deferred tax on change in fair value of business property

- - 15,319 - - 15,319

Change in fair value of available for sale financial assets, net of amounts realized

- - 125,719 - - 125,719

Deferred tax on change in fair value of available for sale financial assets, net of amounts realized

- - (27,243) - - (27,243)

Other comprehensive income - - 37,202 - - 37,202

Loss for the year - - - - (412,845) (412,845)

Total comprehensive (loss)/income for the year - - 37,202 - (412,845) (375,643)

Transactions with owners recognized directly in equity

-

Payment of registered capital 158,689 681,483 - - - 840,172

Dividends paid - - - - (980) (980)

Allocation of profit for the previous year - - - 4,317 (4,317) -

Transfer due to depreciation of revalued business property

- - (3,075) - 3,075 -


- - 615 - - 615

Balance at 31 December 2014 601,576 681,483 171,581 513,007 (102,169) 1,865,478


Change in fair value of business property - - 120 - - 120


- - (24) - - (24)

Change in fair value of financial assets available for sale, net of amounts realized

- - (35,712) - - (35,712)


- - 7,143 - - 7,143

Other comprehensive loss - - (28,473) - - (28,473)

Profit for the year - - - - 46,771 46,771

Total comprehensive income for the year - - (28,473) - 46,771 18,298


Allocation of profit for the previous year - - - (117,472) 117,472 -


- - (1,422) - 1,422 -


- - 284 - - 284

Balance at 31 December 2015 601,576 681,483 141,970 395,535 63,496 1,884,060



27

Statement of changes in equity (continued) for 2015

Group in HRK'000 Registere

d capital Share

premium Fair value

reserve Reserves Retained earnings Total

Non-controlling

interest Total equity

Balance at 1 January 2014 442,887 - 215,657 509,179 627,794 1,795,517 47,463 1,842,980


Change in fair value of business property - - (86,232) - - (86,232) (6,454) (92,686)


- - 17,706 - - 17,706 - 17,706


- - 132,770 - - 132,770 407 133,177

Deferred tax on change in fair value of financial assets available for sale, net of amounts realized

- - (22,128) - - (22,128) - (22,128)

Foreign currency differences for foreign operations

- - (7,282) - - (7,282) 314 (6,968)

Other comprehensive income/(loss) - - 34,834 - - 34,834 (5,733) 29,101

(Loss)/profit for the year (466,073) (466,073) 381 (465,692)

Total comprehensive (loss)/income for the year

- - 34,834 - (466,073) (431,239) (5,352) (436,591)


Payment of share capital 158,689 681,483 - - - 840,172 - 840,172

Dividends paid - - - - (1,586) (1,586) - (1,586)

Allocation of profit for the previous year - - - 5,567 (5,567) - - -

Other transfers - - (1,311) - (5,976) (7,287) (7,038) (14,325)


- - (2,971) - 2,971 - - -


- - 594 - - 594 - 594

Balance at 31 Decmber 2014 601,576 681,483 246,803 514,746 151,563 2,196,171 35,073 2,231,244


Change in fair value of business property - - 81 - - 81 - 81


- - (24) - - (24) - (24)


- - (33,767) - - (33,767) - (33,767)


- - 7,110 - - 7,110 - 7,110

Foreign currency differences for foreign operations

- - 730 - - 730 (87) 643

Other comprehensive loss - - (25,870) - - (25,870) (87) (25,957)

Profit/(loss) for the year 110,402 110,402 (651) 109,751

Total comprehensive income/(loss) for the year

- - (25,870) - 110,402 84,532 (738) 83,794


Dividends paid - - - - (292) (292) (410) (702)

Allocation of profit for the previous year - - - (117,472) 117,472 - - -

Acquisition of non-controlling interest - - - - 7,876 7,876 (19,328) (11,452)

Decrease in fair value reserve (16,154) (16,154) (16,154)

Other transaction - - 600 (1,739) 4,070 2,931 - 2,931


- - (7,403) - 7,403 - - -

Deferred taxes on change in fair value of business property

- - 1,481 - - 1,481 - 1,481

Balance at 31 December 2015 601,576 681,483 199,457 395,535 398,494 2,276,545 14,597 2,291,142



28

Statement of cash flows for 2015


in HRK'000 Note 2015 2014 2015 2014

Cash flows from operating activities

Profit/(loss) before tax 67,054 (513,422) 141,284 (556,580)

Depreciation and amortisation 10 37,685 42,085 53,941 60,248

Impairment of investments 12.1 39,645 300,765 2,189 337,334

Impairment of property and equipment 11 - 105,120 - 105,120 Interest expense 12 - 576 - - Interest income 6 (142,959) (214,785) (152,818) (250,077) Dividend income and share in profit of associates (17,577) (9,500) (21,310) (11,564) Losses / (gains) from changes in fair value of investment property

31,152 (34,658) 49,137 (34,755)

Net provisions for legal disputes, termination benefits, etc.

(17,567) 164,659 (4,468) 167,384

Other adjustments - (31,489) 7,359 (23,877) Cash flows before changes in operating assets and liabilities

(2,567) (190,649) 75,314 (206,767)

Changes in available for sale financial assets (609,266) (757,976) (750,473) (958,081) Changes in financial assets at fair value through profit or loss

184,969 172,945 231,580 204,289

Changes in loans and receivables 85,821 (786,099) 98,222 (636,526) Changes in reinsurance share in technical provisions

32,646 (12,430) (18,822) (15,023)

Changes in insurance contract and other receivables

(43,602) 265,604 (32,897) 100,585

Changes in technical provisions 148,065 48,833 225,694 149,816 Termination benefits (123,414) (29,406) (127,777) (29,406) Changes in insurance contract and other liabilities 117,206 177,743 103,408 195,168 Income tax paid (8,536) (25,300) (15,489) (37,211)

Changes in operating assets and liabilities (216,111) (946,086) (286,554) (1,026,389)

Net cash flows used in operating activities (218,678) (1,136,735) (211,240) (1,233,156)

Cash flows from investing activities

Proceeds from sale of tangible assets - 8,703 - 9,654

Purchase of tangible assets (19,465) (37,770) (25,923) (38,926)

Proceeds from sale of intangible assets - 3,942 - 4,042

Purchase of intangible assets (9,628) (4,314) (14,372) (8,294)

Purchase of investment property (2,140) (2,990) (2,464) (7,434)

Capital increase in subsidiaries (50,038) (52,775) - -

Purchase of non-controlling interest (11,452) - (11,452) -

Sale of subsidiaries 22,115 - - -

Proceeds from held-to-maturity investments 245,350 395,282 329,136 521,244

Purchase of held-to-maturity investments (94,637) - (164,139) (112,149)

Proceeds from dividends and share in profit 17,577 17,124 7,540 4,212 Proceeds from short-term and long-term deposits and loans

159,594 118,423 168,150 111,161

Short-term and long-term deposits and loans granted

(229,208) (62,922) (234,226) (62,922)

Interest income 147,795 145,876 159,937 155,038

Net cash flows from investing activities 175,863 528,579 212,187 575,626


29

Statement of cash flows (continued) for 2015

Cash flows from financing activities

Share capital increase 24.1 - 840,171 - 840,171

Receipts from received loans - 750,576 - 750,576

Repayment of received loans - (1,101,208) (29,467) (1,101,208)

Payment of share in profit (dividend) - (1,328) (702) (3,206)

Net cash flows from financing activities - 488,211 (30,169) 486,333

Cash and cash equivalents at beginning of period 23 101,175 221,120 165,378 336,575

Cash and cash equivalents at end of period 23 58,360 101,175 136,156 165,378

Net decrease in cash and cash equivalents (42,815) (119,945) (29,222) (171,197)



Notes to financial statements for the year ended 31 December 2015

30

Notes to the financial statements

1. GENERAL INFORMATION ON THE COMPANY 1.1. Legal framework, activities and employees

CROATIA osiguranje d.d., Zagreb, Miramarska 22 (the “Company”) is registered in the Court Register of the Commercial Court in Zagreb under the Company’s Court Reg. No. (“MBS”) 080051022 and PIN (“OIB”) 26187994862.

The Company's principal activity is non-life and life insurance business. Since 2004 the Company’s shares have been listed in the first listing of the Zagreb Stock Exchange, Zagreb.

The Company is the parent company of the Croatia osiguranje d.d. Group (the "Group").

1.2. Company bodies The Company's bodies are the General Assembly, the Supervisory Board and the Management Board. Members of the Supervisory Board:

Ante Vlahović President of the Supervisory Board

Mladen Blažević Vice president of the Supervisory Board

Branko Zec Member of the Supervisory Board

Roberto Škopac Member of the Supervisory Board

Josip Tica, PhD, Adjunct Professor Member of the Supervisory Board

Miroslav Hrašćanec (until 18 January 2016) Member of the Supervisory Board

Vitomir Palinec (from 18 June 2015) Member of the Supervisory Board

Members of the Management Board:

Sanel Volarić President of the Management Board

Nikola Mišetić Member of the Management Board

Andrej Koštomaj (until 29 February 2016) Member of the Management Board

Marijan Kralj (from 17 May 2015) Member of the Management Board



31

1.3. Subsidiaries

The Group consolidated the following entities as at 31 December 2015:

31 December 2015

Group

Nature of

business

Shares

directly

held by

parent (%)

Shares

held by the

Group (%)

Shares

held by

non-controlling

interests

(%)

Consolidated subsidiaries in Croatia

Croatia Lloyd d.d., Zagreb Reinsurance 100.00 100.00 -

- Croatia mirovni dom d.o.o., Zagreb Real estate - 100.00 -

- Histria Construct d.o.o., Zagreb Real estate - 100.00 -

Razne usluge d.o.o. (currently being wound up) 100.00 100.00 -

Croatia-Tehnički pregledi d.o.o., Zagreb MOT* 100.00 100.00 -

- STP Pitomača, Pitomača MOT - 100.00 -

- STP Blato MOT - 100.00 -

- Slavonijatrans-Tehnički pregledi d.o.o.,

Sl. Brod MOT

- 76.00 24.00

- Herz d.d., Požega MOT 100.00 100.00 -

Croatia osiguranje mirovinsko društvo d.o.o.,

Zagreb Funds management 100.00 100.00 -

Croatia zdravstveno osiguranje d.d., Zagreb Insurance 66.19 100.00 -

- Poliklinika Ars Medica, Pula Health - 74.00 26.00

- Poliklinika Croatia zdravstveno

osiguranje, Zagreb Health

- 100.00 -

Consolidated subsidiaries abroad

Milenijum osiguranje a.d.o., Beograd Insurance 99.92 99.92 0.08

Croatia Sigurimi sh.a., Prishtina Insurance 100.00 100.00 -

Croatia osiguranje d.d., Ljubuški Insurance 94.33 94.33 5.67

- Crotehna d.o.o., Ljubuški MOT - 100.00 5.67

- Croatia remont d.d., Čapljina MOT - 69.79 34.18

- Croauto d.o.o., Mostar MOT - 66.80 37.00

- Hotel Hum d.o.o., Ljubuški Hospitality - 100.00 5.67

- Ponte d.o.o., Mostar Insurance agency - 100.00 21.33

Croatia osiguranje d.d., društvo za osiguranje

neživota, Skopje (non-life insurance

company)

Insurance

100.00 100.00 -

Croatia osiguranje d.d., društvo za osiguranje

života, Skopje (life insurance company) Insurance

100.00 100.00 -

*MOT – Motor vehicle examination station



32

1.4. Reclassification

In 2015, the Group and the Company reclassified certain items in the statement of comprehensive income to achieve better presentation of expenses and revenue by their nature.

Reclassifications as at 31 December 2014 (Company):

31 December 2014 31 December 2014

Item Description of reclassification

Before reclassification

Reclassification After

reclassification

in HRK'000 in HRK'000 in HRK'000 COMPREHENSIVE INCOME

Acquisition costs (233,825) (134,868) (368,693)

Administrative expenses

Commission paid to sales employees has been reclassified to Acquisition costs (852,163) 134,868 (717,295)

Difference - -

Reclassifications as at 31 December 2014 (Group): 31 December 2014 31 December 2014

Item Description of reclassification

Before reclassification

Reclassification After

reclassification

in HRK'000 in HRK'000 in HRK'000 COMPREHENSIVE INCOME

Finance income 376,131 46,513 422,644

Other operating income

Finance income of the non-insurance segment of the Group has been reclassified to Finance income 206,098 (46,513) 159,585

Difference -

Acquisition costs (330,811) (155,811) (486,622)

Administrative expenses

Commission paid to sales employees has been reclassified to Acquistion costs (995,707) 72,758 (922,949)

Other operating expenses

Other operating expenses of the non-insurance segment of the Group have been reclassified to Administrative expenses (295,804) 83,053 (212,751)

Difference - -



33

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies adopted in the preparation of financial statements is set out below. Policies are consistently applied to all the years presented, unless otherwise stated.

In 2015, the Group reclassified certain items in the statement of comprehensive income to achieve better presentation. In addition, unless otherwise stated, the Group also indicates the application of the same policies and disclosures in the Company’s financial statements.

2.1. Statement of compliance and basis of presentation

The financial statements for 2015 have been prepared in accordance with the Accounting Act (Official Gazette 109/07, 54/13, 121/14, 78/15 and 134/15) and International Financial Reporting Standards ('IFRS') as adopted in the European Union, and in accordance with the Ordinance on the structure and content of the financial statements of insurance and reinsurance companies (Official Gazette 132/10, 39/12).

These are consolidated financial statements of the Croatia osiguranje Group that also include separate financial statements of the Company (‘Parent’ of the Group) as defined in International Accounting Standard 27 "Consolidated and Separate Financial Statements".

2.2. Basis of preparation

The consolidated and separate financial statements of CROATIA osiguranje d.d. have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the EU and IFRS Interpretations Committee (IFRS IC) interpretations applicable to companies reporting under IFRS. The consolidated and separate financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, investment property, available-for-sale financial assets, and financial assets at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS as adopted in the EU requires the use of certain critical accounting estimates. It also requires the Management Board to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated and separate financial statements are disclosed in note 2.34.

2.3. Adoption of new and revised International Financial Reporting Standards ("IFRS")

The accounting policies adopted are consistent with those of the previous financial year unless otherwise stated and disclosed.

The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year which were endorsed by the EU. When the adoption of the standard or interpretation is deemed to have an impact on the financial statements or performance of the Group, its impact is described below.

(a) Standards and interpretations that have been applied and in force:

The Group for its reporting period that begins on 1 January 2015 adopted the following new and amended IFRSs that have been approved by the European Union and that are relevant to the financial statements:

Annual improvements to IFRSs – 2010 – 2012 Cycle comprising changes to seven standards (IFRS 1, IFRS 3, IFRS 8, IFRS 13, IAS 16 and IAS 28 and IAS 24).

Annual improvements to IFRSs – 2011 – 2013 Cycle comprising changes to four standards (IFRS 2, IFRS 3, IFRS 13 and IAS 40).

Defined Benefit Plans: Employee Contributions - Amendments to IAS 19

There was no impact on the financial statements or performance of the Group.



34

(b) Standards and interpretations issued but not yet effective:

Certain new standards and interpretations have been published that are not mandatory for 31 December

2015 reporting periods and have not been early adopted by the group. None of these is expected to have

significant effect on the Group's financial statements, except for the following standards:

:

IFRS 9 Financial instruments and associated amendments to various other standards (effective for annual periods beginning on or after 1 January 2018 or later for insurance companies).

For insurance companies this standard will be delayed until the adoption and implementation of the new standard IFRS 4 Insurance Contracts, when joint application is expected.

IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting. In December 2014, IASB made further changes to the classification and measurement rules and also introduced a new model of impairment. With these amendments, IFRS 9 is now completed.

The Management Board of the Group assessed the following possible impacts of the new standard IFRS 9 on its financial statements:

• Following the changes approved by IASB in July 2014, the Group no longer expects any impact from the new classification, measurement and derecognition rules on the Group’s financial assets and liabilities.

• While the the Group has yet to undertake a detailed assessment of the debt instruments currently classified as available-for-sale financial assets, it would appear that they would satisfy the conditions for classification as at fair value through other comprehensive income (FVOCI) based on their current

business model used these assets. Hence there will be no change to the accounting for these assets. • There will also be no impact on the Group’s accounting for financial liabilities, as the new requirements only

affect the accounting for financial liabilities that are designated at fair value through profit or loss and the

Group does not have any such liabilities. • The new hedging rules align hedge accounting more closely with the Group’s risk management practices. As a

general rule it will be easier to apply hedge accounting going forward as the standard introduces a more principles-based approach. The new standard also introduces expanded disclosure requirements and changes

in presentation. • The new impairment model is an expected credit loss (ECL) model which may result in the earlier recognition

of credit losses, particularly with receivables and loans. • The Group has not yet assessed how its own hedging arrangements and impairment provisions would be

affected by the new rules.

The Management Board plans to adopt the standard on its effective date and when endorsed by the European

Union, especially in terms of application in the insurance industry.

• IFRS 15 Revenue from contracts with customers and associated amendments to various other standards (effective for annual periods beginning on or after 1 January 2018)

IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for

goods and services and IAS 11 which covers construction contracts.

The new standard is based on the principle that revenue is recognized when control of a good or service

transfers to a customer – so the notion of control replaces the existing notion of risks and rewards.

Key changes to current practice are:

• Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements

• Revenue may be recognised earlier than under current standards if the consideration varies for any

reason (such as for incentives, rebates, performance fees, royalties, success of an outcome, etc.) • The point at which revenue is able to be recognised may shift: some revenue which is currently

recognised at a point in time at the end of a contract may have to be recognised over the contract term

and vice versa • There are new specific rules on licenses, warranties, non-refundable upfront fees and, consignment

arrangements, to name a few; and • As with any new standard, there are also increased disclosures..

Entities will have a choice of full retrospective application, or prospective application with additional disclosures.



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The Group's Management Board is currently assessing the impact of the new rules of IFRS 15 and has identified the following areas which are likely to be affected:

• Extended warranties, which will need to be accounted for as separate performance obligations, which will delay the recognition of a portion of the revenue

• IT consulting services where the new guidance may result in the identification of separate performance obligations which could again affect the timing of the recognition of revenue; and

• The balance sheet presentation of rights of return, which will have to be grossed up in the future

(separate recognition of the right to recover the goods from the customer and the refund obligation).

At this stage, the Group is not able to estimate the impact of the new rules on the Group's financial statements; it will make more detailed assessments of the impact over the next twelve months. The Management Board plans

to adopt the standard on its effective date and when endorsed by the European Union.

IFRS 16 Leases (issued in January 2016 and effective for annual periods beginning on or after 1 January 2019)

The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognize: a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value, and b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Group is currently assessing the impact of the

amendments on its financial statements.

2.4. Key estimates and uncertainty of estimates

In preparing the financial statements estimates were used which influence the presentation of assets and liabilities of the Group, the income and expenses of the Group and the disclosure of contingent liabilities of the Group. Future events and their effects cannot be reliably anticipated, and therefore actual results may differ from these estimates. The accounting estimates used in the preparation of the financial statements are subject to change as new events occur, as more experience is gained, additional information is obtained and due to the changing environment in which the Group operates. The key estimates used in applying accounting policies in the preparation of the financial statements relate to amortisation and depreciation of intangible and tangible assets, calculation of premiums and technical provisions, determining fair value of investments in real estate, and presentation of contingent liabilities. Information about the assessments of the Management Board regarding the application of IFRS, which have a significant impact on the financial statements, and the information about the estimates with a high risk of likely material adjustment in the next year, is presented in Note 2.34.



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2.5. Consolidation

The consolidated financial statements comprise the Company and its subsidiaries (together "the Group"). Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Transactions eliminated at consolidation Balances and transactions between Group members and any unrealised income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are also eliminated in the same way as unrealised gains, but only if there are no indicators of impairment. Non-controlling interests Non-controlling interests in subsidiaries are included in the total capital of the Group. Losses applicable to non-controlling interests in subsidiaries are added to non-controlling interests in situations where this causes non-controlling interests to be disclosed with negative value. The reconciliation of non-controlling interest is based on the proportionate amount of the net assets of the subsidiary, with no adjustment to goodwill and recognition of profit or loss in the income statement. Loss of control At the moment of loss of control, the Group derecognises assets and liabilities of subsidiaries, interests of non-controlling shareholders and other elements of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any share in the previous subsidiary, this share is measured at fair value at the date on which control ceases. After that, this is reported as an investment valued using the equity method or as available-for-sale financial assets, depending on the level of influence retained.

Joint arrangements The Group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. 2.6. Presentation currency

The financial statements of the Group are presented in Croatian kuna (HRK) as the functional and presentation currency of the Group.

2.7. Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated into the functional currency using the exchange rate effective at the reporting day. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate effective on the date on which their fair value is determined. Changes in the fair value of monetary securities denominated in or linked to a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Foreign exchange differences resulting from the translation of monetary assets and liabilities are recognised through profit or loss, and are presented within finance income or finance cost. As at 31 December 2015, the official HRK exchange rate was HRK 7.635047 for EUR 1 (31 December 2014: HRK 7.661471) and HRK 6.991801 for USD 1 (31 December 2014: HRK 6.302107).



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2.8. Gross written premiums

/i/ Gross written premiums represent basic operating income and they comprise non-life and life insurance written premiums.

/ii/ Non-life insurance gross written premiums include all amounts of premiums written in the current accounting period, irrespective of the fact whether these amounts partially or completely pertain to a later accounting period.

Non-life insurance gross written premiums include all gross premiums written in the accounting period, whose beginning of the insurance year falls within the accounting period, irrespective of the fact whether they pertain in whole or in part to later accounting periods. The premiums are presented in gross amounts, that is, they include brokers’ commissions, but exclude taxes and charges levied with premiums. Written premiums include the adjustment of the premium written in prior accounting periods as well as estimates of premiums written at the end of the period. Written premiums, that is, gross written premiums, and unearned premiums include adjustments for the write-off of receivables from policyholders as a result of insurance termination. Net impairment losses on receivables for premium of policyholders are recognised as a deduction. The earned portion of received premiums is recognised as income. Premiums are earned from the date of the risk occurrence during the insurance period, based on the assumption of risk patterns.

/iii/ Life insurance gross written premiums include all amounts of premiums collected until the end of the accounting period. In accordance with the exception permitted by IFRS 4, life insurance premiums are recorded in books on a cash basis. Supplemental insurance premiums are also recorded on a cash basis. 2.9. Investment income and expenses

/i/ Investment income comprises the income realised through participating interests (dividends, profit share, entries – increase in value), income from investments related to land and buildings, interest income, unrealised profit from fair value investment through profit or loss, income from sales of investment, net foreign exchange gains and other investment income. The land and buildings investment income consists of income realized due to an increase in land and buildings value, land and buildings sales income, rental income and other investment income from land and buildings. Land and buildings rental income and income from other operating leases is recognised in profit or loss on a straight-line basis over the entire term of the lease. Interest income is recognised in the income statement as it accrues, taking into account the effective yield on the assets. The interest on monetary assets at fair value through profit or loss is recognised using the effective interest rate method and is presented within interest income. Dividend income is recognised in the income statement on the date that the dividend is declared. The accounting policy relating to finance income recognition is disclosed in Note 3.7. "Financial assets". /ii/ Investment expenses include interest expense, impairment, losses realised on the sale of investments, net foreign exchange losses and other investment expenses. 2.10. Claims incurred

Claims incurred include all settled amounts for claims in the accounting period, irrespective of the accounting period in which they were incurred, net of the reinsurance share in claims, collected recourses, sold and recovered amounts and gross of claims provisions at the end of the accounting period but net of claims provisions at the beginning of the accounting period. In addition to net settled claims, gross settled claims amounts include the costs related to claims settlement (appraisals, attorneys’ fees and similar), surrenders and recourse claims expenditures. 2.11. Operating expenses

Operating expenses include the acquisition and administration costs. Acquisition costs include all direct costs incurred in concluding insurance contracts, such as agents’ costs, payroll costs of employees in sales, commissions and marketing costs. Commission costs are recognised as they arise in accordance with the accruals principle. Administration costs include the costs incurred in connection with portfolio management, expenses for employees as well as other material and non-material costs.



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2.12. Intangible assets

Intangible assets are initially carried at cost, which includes the purchase price, including import duties and non-refundable tax after deducting trade discounts and rebates, as well as all other costs directly attributable to bringing the asset to their working condition for their intended use. Intangible assets are recognised if it is probable that future economic benefits associated with the item will flow to the Group, if the cost of the asset can be reliably measured, and if the cost exceeds HRK 3,500. After initial recognition, assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Amortisation of assets commences when the assets are ready for use, i.e. when the assets are at the required location and the conditions necessary for use have been met. Amortisation of assets ceases when the assets are fully amortised or classified as assets held for sale. Amortisation is calculated by writing off the purchase cost of each particular asset during the estimated useful life of the asset by applying the straight-line method. The estimated useful life of intangible assets is 4 years.

Goodwill Goodwill arising on acquisition represents the excess of the cost of acquisition over the Group's interest in the fair value of acquired net assets, which can be specifically identified on the date of purchase, including intangible assets. Goodwill on acquisition of subsidiaries is included in intangible assets. At least once a year goodwill is tested for impairment. Impairment losses on goodwill are not reversed through profit or loss. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

2.13. Property and equipment

Property and equipment are initially carried at cost, which includes the purchase price, including import duties and non-refundable tax after deducting trade discounts and rebates, as well as all other costs directly attributable to bringing the asset to their working condition for their intended use. Property and equipment are recognised if it is probable that future economic benefits associated with the item will flow to the Group, if the cost of the asset can be reliably measured, and if the cost exceeds HRK 3,500. Upon initial recognition, land and buildings are carried at revalued amount, being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The increase in value of assets due to revaluation is recognised in other comprehensive income. A revaluation is performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date. The Group assessed the fair value of these assets during 2014. After initial recognition, property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Maintenance and repairs, replacements and improvements of minor scale are expensed when incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an asset beyond its originally assessed standard performance, the expenditures are capitalised i.e. included in the carrying value of the asset. Gains or losses on the retirement or disposal of assets are included in the income statement in the period when incurred. Depreciation of assets commences when the assets are ready for use, i.e. when the assets are at the required location and the conditions necessary for use have been met. Depreciation of assets ceases when the assets are fully depreciated or classified as assets held for sale. Depreciation is charged so as to write off the cost of each asset, other than land and tangible assets under construction, over their estimated useful lives, using the straight line method, as follows:

2015 Estimated useful life

2014 Estimated useful life

Buildings 40 years 40 years Furniture and equipment 4-10 years 4-10 years Computer equipment 3 years 3 years Vehicles 5 years 5 years



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The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

2.14. Investment property

Investment property (land, buildings) that are not used for operations and that are owned by the Group or held under finance lease and that are held to enable the Group to realise rental income and/or capital appreciation of assets and are measured at fair value through profit or loss. The Group measures the fair value of its investment property at the end of each accounting period, and this measurement is based on the appraisal by a hired appraiser. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with it will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is reclassified to property and equipment, and its carrying amount at the date of reclassification becomes its deemed cost to be subsequently depreciated. 2.15. Investments in subsidiaries and associates

Subsidiaries are companies in which the Company controls the adoption and implementation of financial and operating policies. Associates are companies in which the Company has significant influence but not control over the adoption and implementation of financial and operating policies. Investments in subsidiaries and associates are presented using the cost method. 2.16. Financial instruments

/i/ Classification and recognition

The Group classifies its financial instruments into the following categories: financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial assets, held-to-maturity investments and other financial liabilities. The classification depends on the purpose for which the financial assets and liabilities were acquired. The management determines the classification of financial assets and financial liabilities at initial recognition and, where appropriate, re-evaluates this designation at each reporting date.

Financial assets and financial liabilities at fair value through profit or loss

Financial assets and financial liabilities at fair value through profit or loss are those that are classified as assets and liabilities held for trading or those that the Group initially classified as at fair value through profit or loss Trading assets and liabilities are those assets and liabilities that the Group acquires or incurs principally for the purpose of selling or repurchasing in the near term, or holds as a part of a portfolio that is managed together for short-term profit or position taking. The Group designates financial assets and liabilities at fair value through profit or loss on inception when either:

the assets and liabilities are managed, evaluated and reported internally on a fair value basis;

the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; or

the asset or liability contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract.

Financial assets at fair value through profit or loss include debt and equity securities, investments in funds and other financial assets for trading. Derivatives are classified as assets held for trading. At the reporting date, the Group does not hold derivative financial instruments. The Group does not use hedge accounting.



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Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those:

that the entity intends to sell immediately or in a short period of time and that will be classified as financial assets held for trading, and that which the Management classifies at initial recognition as assets at fair value through profit or loss;

that the entity, upon initial recognition, classifies as available for sale; or

for which it is unlikely that the entity will recover the larger portion of the initial investment value, except in the case of credit rating deterioration, and which will be classified as available for sale.

Loans and receivables are created when the Group approves financial resources to clients without the intention to trade in such receivables, and they include deposits with credit institutions, mortgage loans and loans given to policyholders from mathematical provisions for life insurance which are secured with vinculary life insurance policies. Accounting of receivables arising from insurance contracts is disclosed in Note 2.17.

Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. Held-to-maturity investments include debt securities with fixed income.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Financial assets classified as available for sale are intended to be held for an indefinite period. However, they may be sold so as to maintain liquidity or in the event of changes in interest rates, exchange rates or prices of equity instruments. Other financial liabilities Other financial liabilities include all financial liabilities that are not classified in the category at fair value through profit or loss. On the reporting date the Group had no financial liabilities at fair value through profit or loss, except for liabilities for unit-linked products. Accounting of liabilities arising from insurance contracts is disclosed in Note 2.21. /ii/ Recognition and derecognition

Regular purchases and sales of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets are recognized on the trade date, that is, the date on which the Group commits to purchasing or selling the instrument. Loans and receivables as well as financial liabilities are initially recognized on the date of occurrence, that is, on the day on which they are advanced to borrowers or received from lenders. The Group derecognises financial assets (in full or in part) when the contractual rights to receive cash flows from the financial asset have expired or when it loses control over the contractual rights to such financial assets. This occurs when the Group essentially transfers all risks and rewards of ownership to another business entity, or when the rights are exercised, surrendered or expired. The Group ceases to recognize financial liabilities only when they cease to exist, that is, when they are met, cancelled or expired, or when they are transferred. Should the terms of financial liabilities substantially change, the Group shall cease to recognise that particular liability and at the same time recognise a new financial liability, with new terms.



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Initial and subsequent measurement

Financial assets and liabilities are recognised initially at their fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. After initial recognition, the Group measures financial instruments at fair value through profit or loss, and available-for-sale financial assets at their current fair value, without any deduction for selling costs. For financial instruments traded in active markets, the determination of fair values of financial assets and financial liabilities is based on quoted market prices. This includes equity securities and debt instruments quoted on official stock exchanges. For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fair values are estimated from observable financial information based on which value is determined using the discounted cash flow method and/or method of comparable companies and transactions.. In cases where the fair value of unlisted equity instruments cannot be determined reliably, the instruments are carried at cost. Loans and receivables and held-to-maturity investments are measured at amortized cost net of impairment. Financial liabilities not classified at fair value through profit or loss are measured at amortised cost. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the associated instrument and amortized using the effective interest rate of that instrument. Gains and losses

Gains and losses arising from a change in the fair value of financial assets or financial liabilities at fair value through profit or loss are recognized in profit or loss. Gains and losses arising from changes in the fair value of available-for-sale monetary assets are recognised directly in other comprehensive income. Impairment losses, foreign exchange gains and losses, interest income, including amortisation of premium or discount using the effective interest method, on available-for-sale monetary assets are recognized in profit or loss. Foreign exchange differences resulting from the revaluation of non-monetary financial assets denominated in or linked to foreign currency that are classified as available for sale are recognized within other comprehensive income, along with all other changes in their fair value, whereas income earned from dividends is recognized through profit or loss. Upon sale or other derecognition of available-for-sale financial assets, all cumulative gains or losses are transferred from other comprehensive income to profit or loss. Gains and losses on financial instruments carried at amortised cost may also arise, and are recognized in profit or loss, when a financial instrument is derecognized or when its value is impaired. Apart from gains and losses arising from the change in fair value of available-for-sale financial assets which are recognized in other comprehensive income, as described above, all other gains and losses and interest are recognized in profit or loss in line items “Finance income” and “Finance costs”. Fair value measurement principles

The fair value of financial assets and liabilities at fair value through profit or loss and available-for-sale financial assets is their quoted market price at the reporting date without any deduction for estimated future costs to sell. If the financial assets market (including the unlisted securities market) is not active, or if, for any other reason the fair value cannot be reliably measured on the basis of the market price, the Group determines the fair value based on observed prices (prices of similar or identical items), and when this is not available, it applies various estimation techniques that use all relevant information and inputs that can help in estimating the fair value. This includes the use of prices attained in recent transactions between informed and willing parties, reference to other essentially similar instruments, discounted cash flow analysis and option pricing models, making maximum use of market information and relying on the specific characteristics of the entity as little as possible. Where discounted cash flow techniques are used, estimated future cash flows are based on the management's best estimates and the discount rate is the market rate effective at the reporting date and used for financial instruments with similar conditions. Where a pricing model is used, the market related rates effective at the reporting date are used.



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/iii/ Impairment of financial assets

At each reporting date the Group assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of the asset that can be estimated reliably. The Group takes into account the evidence of impairment for both a specific asset and at group level. All individually significant financial assets are assessed for impairment. All individually significant financial assets where impairment has not been identified are included in the basis for assessing impairment at group level for impairment that has occurred but has yet to be identified. Assets that are not individually significant are assessed for impairment by grouping together financial assets (presented at amortised cost) on the basis of similar risks. Objective evidence of impairment of financial assets (including equity securities) includes default or delinquency by a borrower, restructuring of loans or advances by the Group on terms that the Group would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for the security, or other available data relating to a group of assets, such as adverse changes in the payment status of borrowers or issuers within the group, or economic conditions that are connected with defaults within the group. For the purposes of assessing impairment at group level, the Group relies on historical experience in terms of loss rates, periods of loss recognition, adjusted for the purposes of the management's assessment as to whether current economic and credit conditions are such that the actual losses may be higher or lower than before. Loss rates and the expected recognition period are reviewed regularly. Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial assets and the present value of estimated cash flows discounted at the assets’ original effective interest rate. Losses are recognised through profit or loss and reflected in impairment provisions. Interest on impaired assets is recognized as discount amortisation and at collection of payment. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the investment below its cost is considered as an evidence of impairment. If any such evidence exists for available-for-sale financial assets, the cumulative loss, calculated as the difference between the cost and current fair value, less any loss from impairment of that financial asset that was previously recognized in profit or loss, is transferred from other comprehensive income and recognised in profit or loss. Impairment losses recognised in profit or loss on equity securities cannot be subsequently reversed through profit or loss, but all value increases until the final sale are recognised in other comprehensive income. If a subsequent event results in the decrease in the amount of impairment loss for financial assets that are presented at amortised cost and for debt securities available for sale, the previously recognised impairment loss is reversed and recognized through profit or loss. Changes in the amount of impairment related to the time value of money are recognised as a component of interest income. /iv/ Specific instruments

Debt securities

Debt securities are classified as held-to-maturity investments or financial assets at fair value through profit or loss or as financial assets available for sale, depending on the purpose for which the debt security has been acquired. Loans and receivables from banks

Deposits with banks are classified as loans and receivables and valued at amortised cost less impairment losses.



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Equity securities

Equity securities are classified as assets at fair value through profit or loss or as available-for-sale financial assets and measured at fair value, unless it is impossible to reliably establish the fair value (as described above) when they are measured at cost.

Loans and receivables from policyholders

Loans and receivables from policyholders are presented at amortised cost less impairment to reflect the estimated recoverable amounts.

Investments in funds

Investments in open-end funds are classified as financial assets at fair value through profit or loss or as available-for-sale financial assets and they are measured at current fair value. Investments for the account and risk of life insurance policyholders

Investments for the account and risk of life insurance policyholders include investments in unit-linked products and are classified as financial assets at fair value through profit or loss. Receivables from insurance and other receivables

Receivables from direct insurance and other receivables are recognized initially at fair value and subsequently at amortized cost less impairment. Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently at amortised cost. Embedded derivatives within insurance contracts and investment contracts

Sometimes, a derivative may be a component of a hybrid (combined) financial instrument or insurance contract that includes both the derivative and host contract with the effect that some of the cash flows of the hybrid instrument vary in a similar way to a stand-alone derivative. These derivatives are known as embedded derivatives. Embedded derivatives are separated from their host contract and measured at fair value, while changes in their fair value are included in profit or loss if they meet the following conditions:

the economic characteristics and risks of embedded derivatives are not closely connected with the economic characteristics and risks of the host contract,

a separate instrument with the same characteristics as those of the embedded derivative would satisfy the definition of a derivative,

the hybrid instrument is not measured at fair value and changes in its fair value are not recognised in profit or loss.

Embedded derivatives that meet the definition of an insurance contract need not be separated from the host contract. Furthermore, the Group has used the exemption provided in IFRS 4, "Insurance Contracts":

it does not separate or measure at fair value the option of the policyholder to repurchase the insurance contract at a fixed price (or the amount based on the fixed amount and interest rate), even if the price is different from the book value of the insurance liability in the host contract,

it does not separate or measure at fair value the option of the policyholder to repurchase the contract with discretionary participation features.

Offsetting of financial instruments

Financial assets and liabilities are offset and presented in the financial statement on a net basis when there is a legally enforceable right to offset the recognized amounts and an intention to settle on a net basis, or the acquisition of assets and settlement of liabilities take place simultaneously.



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2.17. Receivables

/i/ Insurance receivables include receivables from policyholders based on non-life insurance premiums. Receivables based on non-life insurance premiums comprise receivables for written, but not yet invoiced premium and receivables for invoiced, but not paid premium. Recognition of insurance premium is described in Note 2.7. – ''Gross written premiums''. /ii/ Receivables for invoiced but unpaid premium are presented at nominal value, and an adjustment is made for the value of doubtful and uncollectible receivables. Impairment is recognised for all unpaid receivables the due date of which was 180 days prior to the balance sheet date. Impairment can be decreased for receivables which are used as a basis for the payment of claim to the debtor (claims provisions). /iii/ Receivables under the right to recourse are recognized for all recourse cases from amicable proceedings arising from receivables from another insurance company and recourses for which a financial settlement was concluded with the counterparty. Impairment of recourse receivables is done for all receivables where 180 days have passed from the due date. The determined impairment can be decreased by recourse receivables that are likely to be collected. Recognition of income from recourses is deferred due to uncertainty of collection. Income from recourses is deferred for recourses which are not settled in cash with the exception of recourses from other insurance companies which are recognised in profit or loss immediately. /iv/ Other receivables pertain to receivables arising from interest on loans and deposits, receivables arising from advance payments, receivables arising from received payment instruments, etc. 2.18. Cash and cash equivalents and short-term deposits

Cash consists of balances with banks. Cash equivalents are short-term, high-liquidity investments that can be converted at any time into known amounts of cash and are not exposed to significant changes in value. The carrying amounts of cash and cash equivalents generally approximate their fair value. For the purposes of reporting on cash flows, cash and cash equivalents refer to cash with banks and on hand, as well as deposits with original maturity up to three months. 2.19. Income tax

The tax expense represents the sum of the current tax and deferred tax.

Current tax

The current tax liability is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates enacted or substantively enacted at the end of the reporting period.

Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. These assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized on the basis of revaluation of land and buildings and of available-for-sale financial assets. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The calculation of deferred tax liabilities and assets reflects the



45

amount at which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are not discounted and are classified as non-current assets and/or liabilities.

Current and deferred income tax

Current and deferred tax is recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to other comprehensive income, in which case the deferred tax is also recognised directly in other comprehensive income. 2.20. Equity

In its financial records the Group records equity categorized as follows: share capital, fair value reserve, statutory reserves, legal reserves, other reserves, retained earnings and profit/(loss) for the year. /i/ Share capital represents the indivisible share capital of the Company, paid in full.

/ii/ Fair value reserve

The fair value reserve includes profits from the revaluation of properties, net of taxes. The fair value reserve is transferred directly to retained earnings in proportion to the depreciation of the asset.

The fair value reserve of available-for-sale financial assets includes unrealised gains and losses from changes in the fair value of available-for-sale financial assets, net of impairment and deferred tax.

/iii/ Allocations to statutory reserves, legal reserves, other reserves and retained earnings are regulated by decisions of the Company’s General Assembly.

/iv/ The current year income is presented according to the balance as at 31 December and is transferred to the upcoming fiscal year. The utilization or allocation of profit is determined by the decision of the Company’s General Assembly. 2.21. Technical provisions

Technical provisions presented in the financial statements pertain to unearned premiums, mathematical provisions for life insurance, claims provisions, fluctuation provisions and other insurance-technical provisions. They are formed in accordance with the Ordinance on minimum standards, methods of calculating and guidelines for calculating technical provisions in insurance and with the Company's internal policies. All technical provisions have been granted a positive opinion of the appointed certified actuary of the Company.

/i/ Unearned premiums

The Group calculates unearned premiums for those types of insurance where the insurance coverage lasts even after the end of the reporting period, since the insurance year and the reporting period do not overlap. The basis for calculation of gross unearned premium of non-life insurance is the accrued (written) premium, while the basis for the calculation of gross unearned premium of supplemental insurance with life insurance is the collected premium. Unearned premiums are calculated according to the pro rata temporis method, except for the types of loan insurance where a decrease of insurance coverage throughout the contract term is taken into consideration. The reinsurance share of gross unearned premium is determined depending on the reinsurance contract and the method used for the calculation of the corresponding gross unearned premium.

/ii/ Mathematical provisions for life insurance

Mathematical provisions for life insurance are calculated individually for every insurance contract by using the prospective net method in accordance with legal regulations and Ordinances of HANFA. /iii/ Claims provisions

Claims provisions contain provisions for reported claims, provisions for incurred but not reported claims, and provisions for costs of processing claims. Provisions for reported claims are determined by individual assessment. Actuarial methods are applied upon determining provisions for the costs of processing claims and for incurred but unreported claims. The reinsurance share in claims provisions is determined in accordance with reinsurance contracts.



46

/iv/ Provisions for unexpired risks

Provisions for unexpired risks are created for insurance products where the expected value of claims and costs pertaining to unexpired periods of policies valid on the reporting date exceeds the provisions for unearned premiums pertaining to such policies. Provisions for unexpired risks are calculated separately for individual types of insurance or homogeneous group of risk.

/v/ Provisions for bonuses and discounts

Provisions for bonuses and discounts are formed according to the provisions of insurance contracts and in accordance with the Ordinance on minimum standards, methods of calculating and guidelines for calculating technical provisions. 2.22. Technical provisions for life insurance where the policyholder bears the investment risk

Since the Group issues life insurance policies where the policyholder bears the investment risk, adequate separate provisions are created for every relevant insurance contract. 2.23. Reinsurance

The Group cedes premiums to reinsurance in the regular course of business for the purpose of limiting its net loss potential through risk diversification. Reinsurance contracts do not relieve the Group from its direct obligations to policyholders. Premiums ceded and recoverable amounts are presented through profit or loss on a gross basis. Only the contracts that give rise to a significant transfer of underwriting risk are accounted for as reinsurance contracts. Amounts recoverable under such contracts are recognised in the same year as the corresponding claim. Contracts, through which significant underwriting risk (financial reinsurance) is not transferred, are recorded as deposits. During 2015 and 2014, the Group did not conclude any such contracts. Reinsurance assets include amounts receivable from reinsurance companies for ceded insurance liabilities. Receivables from reinsurers are estimated in a manner consistent with the provisions for unpaid claims or claims paid under reinsured policies. Reinsurance assets include the actual or estimated receivables from reinsurers in respect of technical provisions. Reinsurance assets relating to technical provisions are created on the basis of the terms of reinsurance contracts and measured on the same basis as the corresponding reinsured liabilities. Reinsurance receivables are assessed for impairment at each reporting date. 2.24. Liabilities and related assets under liability adequacy test

IFRS 4 provides for the implementation of a mandatory liability adequacy test under the insurance contract. At each reporting date, the Group estimates whether its reported insurance liabilities are adequate, using current estimates of future cash flows for all its insurance contracts. Should the above assessment show that the book value of insurance liabilities is insufficient in relation to the estimated future cash flows, the deficit is charged to profit or loss. Estimates of future cash flows are based on realistic actuarial assumptions, taking into account the current experience of the occurrence of claims. 2.25. Other liabilities

/i/ Liabilities arising from direct insurance pertain to liabilities from claims.

/ii/ Liabilities from reinsurance activities refer to liabilities from reinsurance premium.

/iii/ Other liabilities pertain to domestic trade payables, advance payable, liabilities to employees, commission liabilities, etc.

2.26. Employee benefits and pension plans

Pension obligations For defined contribution plans, the Group pays contributions to state-owned pension and health insurance funds, in accordance with legal requirements or individual choice. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as an expense in profit or loss as they accrue.



47

Short-term employee benefits

Short-term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under the short-term cash bonus or profit-sharing plans if the Group has a present legal obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Other employee benefits

Liabilities based on other long-term employee benefits, such as jubilee awards and termination benefits upon retirement, are recorded as the net present value of the liability for defined benefits at the balance sheet date. The discounted future cash flow method is used for the calculation of the present value of the liability.

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer.

2.27. Provisions

Provisions are recognised only when the Group has a future obligation as a result of a past event, and it is likely that the settlement of the obligation will require an outflow of economic benefits and when it is certain that the amount of the obligation can be measured reliably. Provisions are reviewed at each balance sheet date and adjusted to reflect the best current estimate. Provisions are determined for costs of legal disputes and costs of employee benefits for the number of years of service and retirement (regular jubilee awards and termination benefits) and stimulation termination benefits as part of the redundancy plan. Provisions for awards to employees for long term employment and retirement (regular jubilee awards and termination benefits) are determined by separating for each year of work the present value of the proportional part of the expected amount of regular jubilee awards and termination benefits depending on the total time until the payment of the jubilee award, less the expected turnover of employees. The discount rate is the yield on relevant bonds. 2.28. Impairment

The net book value of the Group's assets, other than financial assets (see accounting policy 2.16) and income tax (see accounting policy 2.19), is reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For intangible assets with no finite useful life (the Group had no such assets on the reporting date) and intangible assets not yet in use, the recoverable amount is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss. Exceptionally, impairment of property measured by using the revaluation model is debited to fair value reserve, if any, and the remaining amount of the impairment after these reserves have been exhausted is recognised in profit or loss for the period. The recoverable amount of an asset and cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.



48

The impairment loss recognised in prior periods is assessed on each reporting date in order to establish whether the loss has decreased or no longer exists. Impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or amortisation, if no impairment loss had been recognised. 2.29. Contingent liabilities and assets

Contingent liabilities are recognized in the financial statements when it is more likely than not that there will be an outflow of cash flows. Other contingent liabilities are disclosed in notes to the financial statements. Contingent assets are not recognised in the financial statements, but recognised when an inflow of economic benefits is virtually certain. 2.30. Events after the balance sheet date

Events after the balance sheet date, which provide additional information on the Group’s position at the reporting date (adjusting events), are reflected in the financial statements. Events that are not adjusting events are disclosed in the notes to the financial statements, if material. 2.31. Earnings per share

Earnings per share are calculated as profit of the period decreased by dividends of preference shares divided by the weighted average of ordinary shares (without treasury shares). 2.32. Classification of contracts

Contracts through which the Group undertakes significant underwriting risk on behalf of the other party (policyholder) by accepting to indemnify the policyholder or another insurance beneficiary, if a particular future event occurs (insured event) which has a negative effect on the policyholder or other insurance beneficiary, are classified as insurance contracts. The underwriting risk differs from financial risk. Financial risk is the risk of possible future change in one or more of the defined interest rates, prices of securities, prices of assets, foreign exchange rates, price or rate indexes, credit rating or credit indexes or other variables, provided that when it comes to a non-financial variable, this variable is not specific to one of the contractual parties. Insurance contracts can also transfer financial risk to some extent. Contracts where the transfer of risk from the policyholder to the Group is not significant are classified as investment contracts.

Both insurance and investment contracts may contain discretionary participation features. A contract with a discretionary participation feature is a contractual right held by a policyholder to receive as a supplement to guaranteed minimum payments, additional payments that are likely to be a significant portion of the total contractual payments, and whose amount or timing is contractually at the discretion of the issuer and that are contractually based on: - the performance of a specified pool of contracts or a specified type of contract, - realised and/or unrealised investment returns on a specified pool of assets held by the issuer or - the profit or loss of the company that issues the contracts. The discretionary element of those contracts is accounted for as a liability within the mathematical provisions. The provision for discretionary bonus within mathematical provisions comprises amounts arising in relation to participating policies, for which the allocation of funds has not been determined at the reporting date. When the allocation of funds is determined, appropriate transfers are made from the provision for discretionary bonuses to individual policies. On the reporting date, the provision for discretionary allocation of profits for the Company amounts to HRK 41,475 thousand (2014: HRK 48,317 thousand), and for the Group HRK 44,476 thousand (2014: HRK 48,821 thousand).



49

2.33. Segment reporting

A business segment is an integral part of a company that carries out business activities from which it can earn income or have expenses incurred, including income and expenses relating to transactions with other constituents of the company, whose business results are regularly reviewed by the chief operating decision maker. The review is carried out in order to make decisions about resources to be allocated to a particular segment and to assess its performance, and for which there is separate financial information. The primary format of the Group for segment reporting are business segments that include life insurance and non-life insurance segments. Allocation of costs between life and non-life insurance segments

Investment income, realized and unrealized gains and losses, expenses and compensations arising from non-life insurance are allocated to the non-life segment.

Investment income, realised and unrealised gains and losses, expenses and compensations related to life insurance are included directly in the life insurance segment.

Income and expenses from investments, realized and unrealized gains and losses, expenses and compensations arising from the investment of equity are allocated to life and non-life segments depending on the allocation of the related assets.

Throughout the year, direct administrative expenses are directly debited to life and non-life insurance segments. For administrative expenses that cannot be directly distributed, the cost is allocated between the life and non-life insurance segments according to the apportionment formula (based on gross written premiums).

Advertising and marketing costs are directly distributed to either the life or non-life insurance segment, depending on the insurance product that they refer to. Commissions are recorded separately to life and non-life insurance segments. A significant portion of staff costs is allocated directly to life and non-life insurance segments. If staff costs cannot be directly allocated to a particular segment, the apportionment formula is used.

Allocation of capital, reserves and assets

Property and equipment, intangible assets and investment property are allocated to the non-life segment. Financial investments are allocated in accordance with sources of funding. Equity is allocated in the manner that the subscribed share capital is allocated in accordance with the statutory requirements pertaining to minimum capital, whereas the surplus is allocated to the non-life segment. Provisions are allocated according to the source of related financial assets, while legal and other provisions are allocated to each segment based on the results of the related segment. Other receivables and liabilities are allocated to those segments from which they arise. 2.34. Main sources of uncertainty related to assessments and key accounting estimates in the

application of the Group's accounting policies

/i/ Impairment losses on loans and receivables

The need for impairment of assets measured at amortised cost is evaluated as described in Note 2.16./iii/ Impairment of financial assets. Provisions for impairment of a particular loan are based on the the management’s best estimate of the current value of expected future cash flows. In evaluating such cash flows, the management assesses the debtor’s financial position and estimated fair value of the loan collateral. Any asset which has undergone impairment is evaluated separately and the credit risk function helps to independently approve a recovery strategy and assessment of realizable cash flows.

The gross value of loans and receivables and the rate of recognized impairment loss at the end of the year are:


31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014

Gross exposure (HRK’000) 420,854 370,899 521,833 523,395

Impairment rate (%) 29% 39% 44% 48%



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The change in the impairment rate of 1 percentage point of the gross amount of the above loans and receivables would increase/reverse impairment loss in the amount of HRK 4,209 thousand (31 December 2014: HRK 3,709 thousand) for the Company and HRK 5,218 thousand (31 December 2014: HRK 5,234 thousand) for the Group.

/ii/ Fair valuation of financial instruments

For certain debt and equity securities the Group applies weighted average prices effective on the last trading date as prescribed by the supervisory body. For financial instruments which are rarely traded and which have a non-transparent price, fair value is less objective and it requires a different level of assessment depending on liquidity, concentration, uncertainty of market-related factors, assumptions regarding prices and other risks which affect a certain instrument. The Group has used discounted cash flow analysis and the method of comparable companies and transactions for various financial instruments that are not traded in active markets.

The carrying amount of financial instruments would be an estimated HRK 3,674 thousand lower or HRK 4,055 thousand higher if the discount rate used in the discount cash flow analysis differed by 1 percentage point from the Management Board’s estimates.

/iii/ Uncertainty of estimates pertaining to the formation of reserves

The most significant assessments in terms of the Group’s financial statements pertain to the forming of reserves. In the forming of reserves, the Group applies regulations issued by HANFA (Croatian Financial Services Supervisory Agency). The Group's staff includes certified actuaries. The Management Board believes that the current level of technical provisions is sufficient.

The Company forms reserves for unexpired risks arising from non-life insurance where it is expected that the claims and administrative expenses likely to arise upon the expiry of the financial year for contracts concluded before that date will exceed the unearned premium from such contracts. Expected cash flows relating to claims and expenses are estimated on the basis of experience of the previous contract term and adjusted for significant individual losses which are not expected to recur. The liability adequacy test was performed on all types of insurance. The management believes that the current amount of provisions is sufficient. Underwriting risk management is described in detail in Note 2.35, while the reserves for insurance contracts are analysed in Note 2.21. Sensitivity od technical reserves is disclosed in Note 2.35.

/iv/ Valuation of property and investment property

Property and investment property taken in exchange for uncollectible receivables are initially measured at fair value based on the assessment of the court appointed expert. the management believes that the net book value of property and investment property as at 31 December 2015 is recoverable.

/v/ Impairment of investments in subsidiaries and associates The impairment of investments in subsidiaries and associates is based on the Management Board's best estimate on the collection of investments. The recoverable amount is the higher of the investment's fair value less costs to sell and value in use.

The carrying amount of investments in subsidiaries and associates would be an estimated HRK 2,411 thousand lower if the discount rate used in the discount cash flow analysis differed by 1 percentage point from the Management Board’s estimates. 2.35. Underwriting risk management

Underwriting risk pertains to the risk that may arise if actual payment of claims and compensations exceed the net book amount of insurance liabilities due to coincidence, error and/or change in circumstances. Underwriting risk includes the risk of the occurrence of a loss-event, risk of determining the amount of premium (setting the tariff), the risk of forming provisions and the risk of reinsurance. Premium risk is present at the moment of issuing the policy, before the insured event occurs. There is a risk that the costs and losses which may occur might be greater than the premiums received. The provision risk



51

represents the risk of having the absolute amount of technical provisions wrongly assessed or of having the actual losses vary around the statistical mean value. Non-life insurance acquisition risk also includes the risk of disaster which arises from highly extraordinary events which are not sufficiently covered by the premium risk or provision risk. Life insurance acquisition risk includes biometrical risk (which involves mortality, longevity, risk of becoming ill or disabled) and the risk of cancelation. The risk of cancelation represents a higher or lower rate of cancelation from policies, interruptions, changes in capitalization (cessation of payments of premium) and surrender.

The Group manages its underwriting risk through acquisition limits, approval procedures for transactions that involve new products or that exceed set limits, through tariff determination, product design and reinsurance management. Its acquisition strategy aims at diversity which will ensure a balanced portfolio and which is based on a large portfolio of similar risks for several years, which reduces the variability of results. As a rule, all non-life insurance contracts are concluded on a yearly basis and the policyholders have the right to decline renewal of contract or to change the contract terms upon renewal. The Group transfers a portion of the risk to reinsurance in order to control its exposure to losses and protect capital resources. The Group purchases a combination of proportional and non-proportional reinsurance contracts to reduce the net exposure to a particular risk depending on the type of insurance. Underwriting risk in the Company is monitored by actuaries within the scope of their tasks and the Risk Management Department, in agreement with them, assumes the indicators in order to include the risks in the risk management process at the overall Company level. A report on the adequacy of provisions, insurance premium and retention is submitted by the appointed certified actuary.

The concentration of underwriting risk

A key aspect of the underwriting risk faced by the Group is the extent of concentration of underwriting risk, which determines the degree to which a particular event or series of events could significantly impact the Group's liabilities. Such concentrations may arise from a single insurance contract or through a number of related contracts from which significant commitments may arise. An important aspect of the concentration of underwriting risk is that it could arise from the accumulation of risks through various types of insurance.

Concentration risk may arise from events that are not frequent but with considerable consequences such as natural disaster, in situations where the Group is exposed to unexpected changes in trends, for example unexpected changes in human mortality or in policyholder behaviour; or where significant litigation or regulatory risks could cause a large single loss, or have a pervasive effect on a large number of contract. The risks underwritten by the Group are primarily located in the Republic of Croatia.

The concentration of underwriting risk before and after reinsurance in relation to the type of accepted underwriting risk is shown below with reference to the carrying value of claims (gross and net of reinsurance) arising under the insurance contract:



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31 Dec. 2015 31 Dec. 2014

Gross claims

incurred

Reinsurance share in

claims incurred

Net claims incurred

Gross claims incurred


claims incurred

Net claims incurred


Accident insurance 38,277 2,114 36,163 47,358 2,981 44,377 Health insurance 9,569 (649) 10,218 18,736 1 18,735 Road motor vehicle insurance 204,991 191 204,800 257,864 153 257,711 Railroad rolling stock insurance 481 - 481 517 - 517 Aircraft insurance 10,575 8,948 1,627 6,887 6,370 517 Vessel insurance 58,297 13,576 44,721 37,532 16,067 21,465 Insurance for goods in transit 13,417 (113) 13,530 8,188 75 8,114 Insurance against fire and natural

disasters 46,317 21,842 24,475 98,773 36,101 62,672

Other types of property insurance 202,756 7,501 195,255 249,332 29,807 219,524 Motor liability insurance 283,149 (3,146) 286,295 270,954 17,742 253,212 Aircraft liability insurance 2,073 446 1,627 244 35 209 Vessel liability insurance 9,418 1,556 7,862 18,675 5,667 13,008 Other types of liability insurance 95,619 27,293 68,326 108,840 33,816 75,023 Loan insurance/credit insurance 24,158 464 23,694 61,558 16,631 44,927 Surety insurance 1,306 1,306 509 - 509 Miscellaneous financial loss

insurance 6,858 (308) 7,166 10,252 2,796 7,456

Travel insurance 3,440 3,440 2,009 - 2,009

Total non-life insurance 1,010,700 79,715 930,985 1,198,228 168,242 1,029,986

Life insurance 447,777 (49) 447,827 366,557 34 366,524 Annuity insurance 9,797 - 9,797 4,984 - 4,984 Supplemental insurance with life

insurance 3,333 - 3,333 3,164 - 3,164

Life or annuity insurance where the policyholder bears the investment risk

31,866 - 31,866 470 - 470

Total life insurance 492,773 (49) 492,823 375,176 34 375,142

Total 1,503,473 79,665 1,423,808 1,573,404 168,276 1,405,128

The Management Board believes that non-life insurance has no significant exposure to any policyholder group under social, professional, generational or similar criteria. The greatest likelihood of significant losses could arise from catastrophic events, such as floods, hail, storms or earthquake damage. The techniques and assumptions that the Group uses to calculate these risks include:

Measurement of geographical accumulations,

Assessment of probable maximum losses,

Excess of loss reinsurance.

Non-life insurance

The basic indicator of underwriting risk is the claims ratio. The following tables present claims ratios, cost ratios and combined ratios before reinsurance as well as the claims ratio net of reinsurance.

Comparison of claims ratio and costs ratio for 2015 and 2014


Non-life insurance 31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014

Claims ratio 57.0% 56.4% 57.1% 57.4% Cost ratio 37.2% 49.6% 41.5% 47.5% Combined ratio 94.2% 106.0% 99.0% 104.8% Claims ratio, net 61.6% 57.1% 60.4% 52.8%

Note: The method of calculating ratios is described in Note 25.8.



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Life insurance

The primary risks in life insurance are interest rate risk and biometrical risks. Interest rate risk is processed through market risks, and biometrical risks are monitored on the basis of actuarial analyses.

Company’s analysis of mathematical provisions according to guaranteed interest rate

Interest included in the tariff is in the range of

Mathematical provisions*

as at 31 Dec. 2015 Share



in HRK'000 % in HRK'000 %

[1, 3] 681,034 30.05% 417,316 20.14%

[3, 4] 1,002,349 44.23% 1,037,803 50.10%

[4, 5] 580,225 25.60% 613,758 29.62%

[5, 6] 2,753 0.12% 2,977 0.14%

2,266,361 100.00% 2,071,854 100.00%

*Mathematical provisions comprise the mathematical provision for agreed sums and mathematical provision for additional sums.

The Group’s analysis of mathematical provisions according to guaranteed interest rate is as follows:

Interest included in the tariff is in the range of


as at. 31 Dec 2015 Share



in HRK'000 % in HRK'000 %

[1, 3] 711,988 28.40% 430,417 18.90% [3, 4] 1,211,378 48.31% 1,228,100 53.92% [4, 5] 581,221 23.18% 616,175 27.05% [5, 6] 2,753 0.11% 2,977 0.13%

2,507,339 100.00% 2,277,669 100.00%

*Mathematical provisions comprise the mathematical provision for agreed sums and mathematical provision for additional sums.

The table above shows mathematical provisions according to guaranteed interest rates. The yield on life insurance investment is presented in the following table and it is sufficient to cover the required interest for the life insurance portfolio.



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Yield on mathematical provision

Company 2015 2014 2013

in HRK'000 in HRK'000 in HRK'000

Average balance of mathematical provision 2,169,108 2,013,562 1,937,766

Yield on investment in mathematical provision 100,904 117,140 115,297

Yield 4.7% 5.8% 6.0%

Average yield 5.5%

Group 2015 2014 2013

in HRK'000 in HRK'000 in HRK'000

Average balance of mathematical provision 2,393,188 2,207,225 2,102,853

Yield on investment in mathematical provision 111,382 125,405 123,010

Yield 4.7% 5.7% 5.8%

Average yield 5.4%

The sensitivity of the present value of future profits to changes in significant variables

Profit or loss and insurance liabilities are mainly sensitive to changes in mortality, cost rates and the discount rate used for the purposes of the liability adequacy test.

The Group assessed the impact of changes in key variables that may have a material effect on the present value of future profits ("PVFP") at the end of the year. For each period, the projection is the calculated profit (vector profit), and "PVFP" is calculated as the present value of profits with a discount rate risk.

The table below shows the sensitivity analysis for life insurance.

Life insurance risk – sensitivity analysis 2015 2014


Change in liabilities Change in liabilities

Interest rate -0,5% 83,941 58,093

Mortality +10% 3,506 4,426

Expenses +10% 26,126 25,455

The Group uses the calculation of "PVFP" for the purposes of managing the sensitivity of underwriting risk. The base run refers to the calculation of liabilities with assumptions used to calculate the best estimate. The base run represents a calculation in which assumptions described in Note 2.36 are applied during the liability adequacy test. For each policy, the income from premiums and investments are calculated, and costs are calculated on the basis of administration costs and expenditure for claims.

Changes in variables represent reasonable possible changes which, had they occurred, would have led to significant changes in insurance liabilities at the reporting date. The reasonably possible changes represent neither expected changes in variables nor worst-case scenarios. The change in each variable was analysed, wherein the other assumptions remained unchanged, and changes in values of the related assets are ignored.

The sensitivity to changes in mortality was calculated by reducing mortality for pension products by 10% and increasing mortality for other products by 10%, while the sensitivity to changes expenses was calculated increasing the portfolio maintenance expense by 10%.

As evidenced by "PVFP", profit or loss as well as technical provisions are most affected by changes in interest rates.



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Non-life insurance

In non-life insurance variables which have the greatest impact on insurance liabilities relate to legal claims from motor vehicle liability insurance. Obligations relating to court damages are sensitive to legal, judicial, political, economic and social trends. The Management Board believes that it is not possible to quantify the sensitivity of non-life insurance to changes in these variables.

Capital adequacy

The current regulatory frame prescribes the manner of calculating the margin of insurance companies’ solvency based on the higher of two criteria: premium or claim criterion.

The Company's solvency indicators are as follows:

31 Dec. 2015 31 Dec. 2014

Solvency indicator for life insurance 146.9% 161.0%

Solvency indicator for non-life insurance 345.4% 345.7%

The Company maintains the solvency margin in accordance with legal provisions, as presented in the table above. 2.36. Principal assumptions that have the greatest effect on recognized assets, liabilities, income and

expenses from insurance operations

/i/ Non-life insurance On the balance sheet date provisions are created for the estimated final cost of settling all claims resulting from events occurred by that date, whether reported or not, together with relevant costs of processing these claims, decreased by amounts already paid. The liability for reported but unsettled claims is estimated separately for every individual claim, taking into consideration the circumstances, available information from the claims adjuster and historical evidence of amounts of similar claims. Individual claims are regularly examined and provisions are regularly updated when new information is available. The assessment of provision for incurred, but not reported claims (IBNR) is generally subject to a greater degree of uncertainty than the provision for reported claims. IBNR provisions are assessed by the Company’s actuaries Depending on the characteristics of certain types of insurance, the Group's portfolio and the shape and quality of available data, reserves for incurred but not reported claims is determined by using the most appropriate model based on deterministic or stochastic methods which are based on the claims triangle. To best describe the future development of the claim, the selected model can include one or a combination of several methods. IBNR provisions are formed according to the type of transaction or homogeneous group of risks. For "long tail" claims, the level of provisions depends largely on the assessment of the development of claims from the latest development year for which historical data is available to the final settlement. These tail factors are estimated prudently by using mathematical methods of curves that project the observed factors or are based on actuarial assessment. The actual method used depends on the year the claim occurred and observed historical claims development. To the extent that these methods use historical claims development, it is assumed that the historical claims pattern will repeat itself in the future. There are reasons why this might not be fulfilled so it is necessary to modify the method. Possible reasons include:

economic, political and social trends (which cause a different level of inflation than expected);

changes in the combination of the types of insurance contracts which are sold;

random variations, including the effect of major losses.

IBNR provisions are initially estimated in the gross amount and a special calculation is performed in order to assess the reinsurance share.



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Discounting In addition to annuity claims, non-life provisions are not discounted. The provisions for liability insurance which are payable in annuities are determined as the current value of future liabilities at the discount rate of 2% per year and based on Mortality Tables for the Republic of Croatia for the period from 2000 - 2002.

/ii/ Life insurance

Mathematical provisions are calculated on the net prospective basis using rational actuarial assumptions, in accordance with the guidelines issued by HANFA. The guaranteed technical interest rate in insurance policies ranges from 1.5 % to 6 %, depending on the original (historic) tariff.

In the case of death and survival, policyholders are entitled to a share in Company profit realised by life insurance funds management. Shares in profit are calculated once a year, at the earliest at the end of the first or second year of the insurance term, depending on the tariff. The amount of the share in profit is determined by the Management Board.

The Company uses Mortality Tables for Croatia for the period 2010 to 2012 for the calculation of mathematical provisions. For the purpose of the calculation of mathematical provisions for insurance contracts concluded before 2010, an interest rate of 3.25%, or 3% is used (maximum rate prescribed by HANFA is 3.3%) for insurance contracts concluded in 2010, i.e. an interest rate of 3% and 2.75% (maximum rate prescribed by HANFA is 3%), or of 2.75%, 2.25% and 1.5% (the maximum rate prescribed by HANFA is 2.75%) is used for insurance contracts concluded after 2010.

Profit or loss and equity sensitivity to changes in significant variables

Profit or loss and insurance liabilities are mainly sensitive to changes in the rate of investment and the rate of costs estimated for the calculation of liability adequacy.

Terms and conditions of insurance contracts that have a significant effect on the amount, duration, and uncertainty of future cash flows

The Group offers different types of non-life insurance, mainly motor vehicle, property, liability insurance, marine insurance, transport insurance, and accident insurance. The main source of uncertainty affecting the amount and timing of future cash flows arises from the uncertainty of the occurrence of future claims as well as the uncertainty associated with their amounts. The amount payable under individual claims is limited by the insured amount as established in the insurance policy.

Other significant sources of uncertainty related to non-life insurance result from legislation that entitles policyholders to report a claim before the statute of limitation, which occurs three years from the first notification of the claim, but not later than five years from the beginning of the year after the year of occurrence. This stipulation is particularly important in cases of permanent disability under accident insurance, due to difficulties in estimating the period between the occurrence of the accident and the confirmation of permanent consequences thereof.

The portfolio of non-life insurance does not include products that warrant unlimited coverage, while the maximum amount for which the insurer may be held liable per each policy due to the occurrence of one loss event is always limited by the contractually agreed insured sum. The exception to this rule is motor vehicle liability insurance in the Green Card Insurance System member states that have unlimited coverage. Since legal provisions in motor vehicle liability insurance prescribe the application of insured sums in the state where the damage occurred, this risk cannot be completely avoided, but it can be transferred through appropriate reinsurance contracts.



57

2.37. Financial risk management

The Group’s primary objective in financial risk management is to maintain a level of capital which is adequate for the scope and types of insurance it transacts, and with due consideration of the risks it is exposed to. The Management Board recognizes the importance of having of an efficient and effective risk management system. Competent regulatory bodies control the Company’s solvency in order to ensure that there is coverage for liabilities arising from possible economic changes or natural disasters. The Group actively manages its assets by using an approach which balances quality, diversification, harmonization of assets and liabilities, liquidity and return on investments. The management examines and approves portfolios, determines the limits and supervises the process of managing assets and liabilities. Due attention is also given to the compliance with the rules established by the Insurance Act. Transactions with financial instruments result in the Group assuming financial risks. These risks include market risk, credit risk and liquidity risk. Each of these risks is described below, together with a summary of the methods used by the Group to manage such risks. Market risk

Market risk includes currency risk, interest rate risk and price risk. Market risk is the risk of fluctuations in the fair value of future cash flows under financial instruments due to changes in market prices. a) Currency risk - the risk of fluctuation of fair value or cash flows under financial instruments resulting from changes in foreign currency exchange rates.

The Group is exposed to currency risk through its transactions in foreign currencies. The Group is exposed to currency risk through its investments in debt and equity securities, deposits, loans and other investments, and through premiums, claims and technical provisions under insurance policies with a currency clause. The Group manages currency risk by estimating, planning and thus reducing the difference between assets and liabilities denominated in foreign currency or with a currency clause. Assets covering mathematical provisions are mostly denominated in euro, since most of the mathematical provisions are also denominated in euro. In the tables below the sensitivity analysis of financial assets to changes in exchange rates is presented:

2015 2014

Company

Impact on profit/loss

after tax

Impact on comprehensive

income


after tax


income


Change of exchange rate by 0.5% 15,868 765 13,588 941

Change of exchange rate by 1% 31,737 1,529 27,176 1,883

2015 2014

Group


after tax


income


after tax


income


Change of exchange rate by 0.5% 17,909 1,996 15,080 1,644

Change of exchange rate by 1% 35,818 3,993 30,160 3,289



58

The currency analysis of the Company’s assets and liabilities at the reporting date is presented as follows:

Company in HRK'000 31 Decemeber 2015 31 December 2014

HRK EUR

Other currencies

Total HRK EUR Other

currencies Total

Assets Investments in subsidiaries, associates and

participation in joint ventures 421,416 - - 421,416 421,371 - - 421,371

Held-to-maturity investments 732,364 1,353,304 - 2,085,668 730,694 1,512,889 - 2,243,583 Available-for-sale financial assets 458,208 1,015,104 134,885 1,608,197 348,229 635,727 50,567 1,034,523 Financial assets at fair value through profit or loss 16,935 88,870 105,805 235,497 52,002 3,276 290,774 Loans and receivables 892,527 768,995 - 1,661,522 965,075 710,607 - 1,675,682 Reinsurance share in technical provisions 243,257 29,995 33,517 306,769 270,780 20,674 47,962 339,416 Insurance contract and other receivables 756,941 23,988 18,697 799,626 730,332 11,878 13,816 756,026 Cash and cash equivalents 21,741 24,007 12,612 58,360 101,175 - - 101,175

Total assets 3,543,389 3,304,263 199,711 7,047,363 3,803,153 2,943,777 115,621 6,862,551

Liabilities Technical provisions 3,233,896 2,500,566 101,444 5,835,906 3,354,222 2,210,516 123,103 5,687,841 Provisions 107,510 - - 107,510 248,491 - - 248,491 Insurance contract and other liabilities and deferred

income 483,342 31,818 22,077 537,237 428,567 - - 428,567

Total liabilities 3,824,747 2,532,384 123,521 6,480,653 4,031,280 2,210,516 123,103 6,364,899

Currency gap (281,358) 771,879 76,190 566,710 (228,127) 733,261 (7,482) 497,652



59

The currency analysis of the Group’s assets and liabilities at the reporting date is presented as follows:

Group in HRK'000 31 December 2015 31 December 2014

HRK EUR Other currencies Total HRK EUR Other

currencies Total

Assets Investments in subsidiaries, associates and participation

in joint ventures 80,275 - 1,378 81,653 69,995 - 1,408 71,403 Held-to-maturity investments 792,185 1,477,822 45,475 2,315,482 831,843 1,649,246 5,830 2,486,919 Available-for-sale financial assets 695,844 1,106,790 199,887 2,002,521 438,202 683,742 135,416 1,257,360 Financial assets at fair value through profit or loss 52,620 137,180 24,197 213,997 314,665 117,431 8,171 440,266 Loans and receivables 1,014,259 878,922 169,630 2,062,811 1,094,397 873,523 173,484 2,141,404 Reinsurance share in technical provisions 86,253 43,573 33,848 163,674 23,716 6,224 114,912 144,852 Insurance contract and other receivables 926,514 24,944 53,045 1,004,503 868,174 33,407 70,024 971,605 Cash and cash equivalents 52,392 52,763 31,001 136,156 130,211 13,004 22,163 165,378

Total assets 3,700,342 3,721,994 558,461 7,980,797 3,771,203 3,376,577 531,408 7,679,188

Liabilities

Technical provisions 3,415,780 2,663,237 637,125 6,716,142 3,431,782 2,431,817 626,849 6,490,448 Provisions 125,043 - 3,845 128,888 260,686 - 447 261,133 Financial liabilities - 1,569 160 1,729 31,208 298 21 31,527 Insurance contract and other liabilities and deferred

income 518,994 37,363 55,360 611,717 472,401 11,610 39,787 523,798

Total liabilities 4,059,817 2,702,169 696,490 7,458,476 4,196,077 2,443,725 667,104 7,306,906

Currency gap (359,475) 1,019,825 (138,029) 522,321 (424,874) 932,852 (135,696) 372,282



60

b) Interest rate risk: Interest rate risk is the risk of fluctuations in the fair value or cash flows under financial instruments due to changes in market interest rates. The Group is exposed to interest rate risk based on financial instruments whose value is sensitive to changes in interest rates. Changes in interest rates do not affect the level of technical provisions for non-life insurance, while mathematical provision for life insurance are discounted using a technical interest rate of a particular product or the maximum interest rate prescribed by HANFA, which can not be higher than the weighted average rate of return on the asset covering mathematical provisions in the last three years. The Group monitors this exposure through periodic reviews of its assets and liabilities. The Group seeks to match any future receipts from these assets with its insurance liabilities by purchasing debt securities. However, due to the significantly shorter duration of bonds in relation to the life of liabilities under life insurance, the Group is exposed to interest rate risk. An analysis of the sensitivity of financial assets to changes in market interest rates is presented below:

Company 2015 2014


after tax


income


after tax

Impact on comprehensiv

e income


Change in interest rate by +/- 100 bps 271 67,583 4,181 34,955

Group 2015 2014


after tax


income


after tax


income


Change in interest rate by +/- 100 bps 1,729 79,201 6,366 10,056

c) Other price risks

Equity securities risk is caused by the fluctuation of fair value or cash flows under financial instruments due to changes in market prices (which are not the result of interest rate risk or currency risk), regardless of whether this involves changes caused by factors inherent to an individual financial instrument or its issuer or if there are other factors which affect all similar financial instruments being traded in the market. The marketable equity securities portfolio, which is presented in the balance sheet at fair value, exposes the Group to this risk. The Group's portfolio comprises securities of various issuers, and the concentration risk of any individual company is monitored and limited by legal requirements and adopted limits. The Group assesses, or measures, and controls the exposure to market risk by monitoring exposure to investments, establishing the limits and authorisations for investments, and through a series of statistical and other quantitative risk measures.



61

The comprehensive system of market risk management is prescribed in a series of internal acts of the Group, primarily the Market Risk Management Policy as an umbrella document. The analysis of price risks:

Company 2015 2014


after tax


e income


after tax


e income

in HRK’000 in HRK’000 in HRK’000 in HRK’000

Change in price by +/- 3% 779 8,522 5,999 9,715

Change in price by +/- 5% 1,298 14,204 9,999 16,191

Group 2015 2014


after tax

Impact on other

comprehensive income


after tax


e income




Credit risk

Credit risk is the risk that one contractual party to a financial instrument might cause the other party to suffer financial losses as a result of failure to fulfil its obligations. The Group is exposed to credit risk through the following financial assets:

reinsurance share in claims provisions

receivables from reinsurance under settled claims

receivables from policyholders

deposits and given loans

debt securities (bonds and commercial bills)

receivables from insurance brokers and other receivables

cash at bank This risk is defined as the potential decrease in market value resulting from adverse changes in the debtor’s ability to repay the debt. The Group manages this risk by a rigorous up-front analysis of credit risk and exposure monitoring, regular reviews carried out by the Management Board and regular meetings held to monitor credit risk development. The management has adopted a credit risk management policy and continuously monitors exposure to credit risk. Assessments of creditworthiness of all policyholders are made, and collaterals are collected prior to payment of granted loans or renewal of such loans. Collaterals are in accordance with the Insurance Act.

Credit risk exposure Company Company

Group Group

31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014



Investments in debt securities 3,455,056 3,039,763

4,138,751 3,551,509 Investments in bank deposits 1,361,856 1,447,677

1,771,683 1,869,905

Loans 299,666 228,005

291,128 271,499 Reinsurance share in technical provisions 306,769 339,416

163,674 144,852

Insurance contract and other receivables 799,626 756,026

1,004,503 971,605 Cash and cash equivalents 58,360 101,175

136,156 165,378

6,281,333 5,912,062

7,505,895 6,974,748



62

Concentration of receivables from the Republic of Croatia as at 31 December


31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014


Republic of Croatia bonds 3,145,341 2,816,293 3,518,654 3,396,036

Bonds of other state institutions 182,110 114,286 182,110 82,019

Treasury bills 45,263 9,920 45,263 69,834

Undue interest on bonds 68,606 62,883 75,645 73,839

Other receivables 30,179 30,945 41,856 33,946

3,471,499 3,034,327 3,863,528 3,655,674

The table below presents an analysis of the Company’s financial assets by category according to the rating agencies Standard & Poor's (S&P), Moody's and Fitch.

Company Company Rating 2015 Rating 2014

31 Dec. 2015 31 Dec. 2014 S&P Moody´s Fitch S&P Moody´s Fitch


Held-to-maturity investments 2,085,668 2,243,583

Croatian Ministry of Finance 1,931,998 2,051,749 BB Ba1 BB BB Ba1 BB Croatian Bank for Reconstruction and Development (HBOR)

111,505 109,932

BB Ba1 - BB Ba1 -

Unrated 42,165 81,901 Unrated Unrated Available-for-sale financial assets 1,324,125 710,700

Croatian Ministry of Finance 1,211,170 688,984 BB Ba1 BB BB Ba1 BB Croatian Bank for Reconstruction and Development (HBOR)

70,604 - BB Ba1 -

Rated companies 14,119 - BB- Ba2 - Unrated 28,232 21,716 Unrated Unrated

Financial assets at fair value through profit or loss 45,263 85,480

Croatian Ministry of Finance 45,263 85,480 BB Ba1 BB BB Ba1 BB Loans and receivables 1,661,522 1,675,682

Rated banks 635,236 619,047 BB - BBB- BB - BBB-

Rated companies 100,000 60,000 B B2 - BB B2 BBB- Unrated 926,286 996,635 Unrated Unrated


306,769 339,416

Rated reinsurers 4,323 - A-

10,237 - A

28,557 - A+

11,791 - AA- Reinsurers with a rating of other agencies 12,790

-

Unrated 239,071 339,416 Unrated Unrated Insurance contract and other receivables 799,626 756,026 Unrated Unrated

Cash and cash equivalents 58,360 101,175

Rated banks

84 77

BB

-

BBB- BB - BBB-

Other banks part of respectable EU banking groups

58,276 101,102 Unrated Unrated

6,281,333 5,912,062



63

The table below presents an analysis of the Group’s financial assets by category according to the rating agencies Standard & Poor's (S&P), Moody's and Fitch.

Group Group Rating 2015 Rating 2014

31 Dec. 2015 31 Dec. 2014 S&P Moody´s Fitch S&P Moody´s Fitch



Croatian Ministry of Finance 1,992,859 2,153,944 BB BA1 BB BB BA1 BB Croatian Bank for Reconstruction and Development (HBOR)

111,505 109,932 BB BA1 - BB BA1 -

Macedonian Ministry of Finance 94,686 94,657 BB- - BB+ - - - Republic of Bosna and Herzegovina 78 118 B B3 B- B- B3 B- Serbian Ministry of Finance 74,188 46,367 BB- B1 B+ BB- B1 B+ Unrated 42,166 81,901 - - - - - -

Available-for-sale financial assets 1,712,564 929,024

Croatian Ministry of Finance 1,535,562 875,800 BB BA1 BB BB BA1 BB Croatian Bank for Reconstruction and Development (HBOR)

70,604 - BB BA1 - - - -

Rated companies 14,119 - BB- BA2 - - - - Macedonian Ministry of Finance 60,464 30,556 BB- - BB+ BB- - BB+ Unrated 31,815 22,668 - - - - - -


110,705 135,566

Croatian Ministry of Finance 45,263 85,565 BB BA1 BB BB BA1 BB Serbian Ministry of Finance 65,442 50,001 BB- B1 B+ BB- B1 B+ Unrated - - - - - - - -

Loans and receivables 2,062,811 2,141,404 - - -

Rated banks 636,236 635,902 BB - BBB- BB - BBB- Rated banks 191,377 - B B3 B- - - - Rated banks 23,181 - BB+ - - - - - Rated companies 100,000 60,000 B B2 - BB B2 BBB- Other banks and financial institutions 26,182 142,133 BB- - BB+ B- B3 B- Unrated 1,085,835 1,303,369 - - - - - -

Reinsurance share in technical provisions 163,674 144,852

Rated reinsurers 10,237 50,552 A - - A - -

4,323 14,129 A- - - A- - -

28,557 42,791 A+ - - A+ - -

- 900 A++ - - A++ - -

11,791 22,982 AA- - - AA- - -

9,055 B B3 B- - - -

417 438 BB+ - - B++ - -

Reinsurers with a rating of other agencies 12,790 - - - - - - Unrated 86,504 13,060 - -

Insurance contract and other receivables 1,004,503 971,605

2,693 - - - A - -

2,014 - - - A- - -

12,994 - - - A+ - -

1,271 - - - AA - -

3,983 - - - AA- - -

5,712 - - - AA+ - -

48 - - - B++ - -

6,231 - - - BBB+ - -

1,004,503 936,659 Unrated Unrated

Cash and cash equivalents 136,156 165,378 Unrated Rated banks 1,491 77 BB - BBB- BB - BBB-

8,352 - B - B- - - - 689 - A - - - - - 15,123 - BBB- - - - - - 2,021 - BB - - - - -

Other banks part of respectable EU banking groups

108,480 165,301 Unrated Unrated

7,505,895 6,974,748



64

Liquidity risk

Liquidity risk is the risk that a sudden and unexpected withdrawal of liabilities might require the Group to liquidate assets in a short time and at a low price. Liquidity risk arises as a result of the financial activities of the Group and in the management of positions. It includes both the risk of being unable to fund assets at appropriate maturities and rates and the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame. The Group has a portfolio of liquid assets as a part of its liquidity risk management strategy, which ensures the continuation of business activities and satisfies legal requirements.

Legal requirements regarding claim settlement have been met on time. The Finance Department monitors the inflows and outflows on a daily basis, and develops monthly plans as well as scenarios of deteriorated liquidity. Liquidity risk is taken into account in the assessment of matching assets and liabilities.

Notes 19.5 and 19.6 disclose the maturity analysis of assets covering provisions at the reporting date. Note 25.7 discloses the maturity analysis of provisions for insurance contracts of the Company.

The following table discloses for financial assets the amounts of contractual discounted cash flows, and for insurance liabilities the estimated maturity of the amounts recognised in the statement of financial position.



65

The maturity analysis at the reporting date is presented as follows:

Company in HRK'000 31 December 2015 31 December 2014

Assets

Up to 1 year

1-3 years 3-5 years 5-10 years

10 and more years

Total Up to 1

year 1-3 years

3-5 years

5-10 years

10 and more years

Total

Investments in subsidiaries, associates and participation in joint ventures - - - - 421,416 421,416 - - - - 421,371 421,371

Held-to-maturity investments 146,432 599,093 547,456 754,191 38,496 2,085,668 240,262 421,700 596,775 984,846 - 2,243,583

Available-for-sale financial assets 259,159 629,272 675,338 44,428 1,608,197 3,620 211,762 487,129 332,013 - 1,034,523

Financial assets at fair value through profit or loss 58,275 5,244 9,145 33,039 102 105,805 192,634 32,801 11,156 54,007 176 290,774

Loans and receivables 488,613 1,153,487 19,422 - - 1,661,522 965,342 367,905 342,435 - - 1,675,682

Reinsurance share in technical provisions 92,216 57,339 29,104 39,062 89,048 306,769 136,097 69,321 33,580 65,237 35,181 339,416

Insurance and other receivables 799,626 - - - - 799,626 756,026 - - - - 756,026

Cash and cash equivalents 58,360 - - - - 58,360 101,175 - - - - 101,175

Total 1,643,522 2,074,322 1,234,399 1,501,630 593,490 7,047,363 2,395,156 1,103,489 1,471,075 1,436,103 456,728 6,862,551

Liabilities

Technical provisions 1,653,877 1,107,657 864,130 1,026,156 1,184,086 5,835,906 1,760,370 1,053,893 810,230 1,075,160 988,188 5,687,841

Provisions 46,803 39,193 5,406 8,872 7,236 107,510 104,398 33,287 32,198 58,079 20,529 248,491

Insurance contract and other liabilities and deferred income 506,014 11,952 6,092 6,677 6,502 537,237 388,748 13,843 8,686 11,314 5,976 428,567

Total 2,206,694 1,158,802 875,628 1,041,705 1,197,824 6,480,653 2,253,516 1,101,023 851,114 1,144,553 1,014,693 6,364,899

Maturity gap (563,172) 915,520 358,771 459,925 (604,334) 566,710 141,640 2,466 619,961 291,550 (557,965) 497,652



66

The maturity analysis for the Group at the reporting date is presented as follows:

Group in HRK'000 31 December 2015 31 December 2014

Assets Up to 1 year 1-3 years 3-5 years

5-10 years

10 and more years

Total Up to 1

year 1-3 years

3-5 years

5-10 years

10 and more years

Total

Investments in subsidiaries, associates and participation in joint ventures - - - - 81.653 81.653 - - - - 71.403 71.403

Held-to-maturity investments 238,283 657,959 602,497 778,246 38,497 2,315,482 305,211 481,566 688,240 1,011,902 - 2,486,919

Available-for-sale financial assets 3,270 446,425 699,914 789,321 63,591 2,002,521 12,007 348,431 532,461 364,390 71 1,257,360

Financial assets at fair value through profit or loss 100,844 59,232 20,780 33,039 102 213,997 297,949 65,546 22,589 54,007 176 440,267

Loans and receivables 639,324 1,286,268 136,514 705 - 2,062,811 1,209,975 448,833 470,964 3,628 8,004 2,141,404

Reinsurance share in technical provisions 55,618 41,437 16,697 22,250 27,672 163,674 54,746 42,188 13,020 25,755 9,143 144,852

Insurance and other receivables 999,304 2,964 868 5 1,362 1,004,503 967,562 2,611 771 661 - 971,605

Cash and cash equivalents 136,156 - - - - 136,156 165,378 - - - - 165,378

Total 2,172,799 2,494,285 1,477,270 1,623,566 212,877 7,980,797 3,012,828 1,389,175 1,728,045 1,460,343 88,797 7,679,188

Liabilities

Technical provisions 2,110,747 1,223,115 970,128 1,146,351 1,265,801 6,716,142 2,348,187 1,023,696 876,437 1,189,194 1,052,934 6,490,448

Provisions 54,776 47,137 6,394 11,111 9,470 128,888 189,534 35,876 10,289 18,036 7,398 261,133

Financial liabilities 903 665 161 - - 1,729 4,306 6,385 20,836 - - 31,527 Insurance contract and other liabilities and deferred income

577,187 12,779 6,919 7,504 7,328 611,717 483,979 13,843 8,686 11,314 5,976 523,798

Total 2,743,613 1,283,696 983,602 1,164,966 1,282,599 7,458,476 3,026,006 1,079,800 916,248 1,218,544 1,066,308 7,306,906

Maturity gap (570,814) 1,210,589 493,668 458,600 (1,069,722) 522,321 (13,178) 309,375 811,797 241,799 (977,511) 372,282



67

Fair value

The price that would be received to sell an asset or paid to transfer a liability in an arm’s length transaction at the measurement date. Fair value is based on quoted market prices, where available. If market prices are not available, fair value is estimated by using discounted cash flow models or other appropriate pricing techniques. Changes in assumptions on which the estimates are based, including discount rates and estimated future cash flows, significantly affect the estimates. Therefore, at this point the estimated fair value cannot be achieved from the sale of a financial instrument. Fair value of investments at amortized cost is presented below:

Company 31 December 2015 31 December 2014

Net book value Fair value Difference



Debt securities 2,085,668 2,296,257 210,589 2,243,583 2,443,623 200,040

Loans 299,666 299,666 - 228,005 228,005 -

Deposits 1,361,856 1,361,856 - 1,447,677 1,447,677 -

3,747,190 3,957,779 210,589 3,919,265 4,119,305 200,040

Group 31 December 2015 31 December 2014




Debt securities 2,315,482 2,510,657 195,175 2,486,919 2,693,433 206,514

Loans 291,128 291,128 - 271,499 271,499 -

Deposits 1,771,683 1,771,683 - 1,869,905 1,869,905 -

4,378,293 4,573,468 195,175 4,628,323 4,834,837 206,514

Methods of assessment or assumptions in determining fair value

For measuring the fair value, the Group takes into account the IFRS fair value hierarchy rules that reflects the significance of inputs used in the assessment process. Each instrument is assessed individually and in detail. The levels of the fair value hierarchy are determined on the basis of the lowest level and the input data that are important for determining the fair value of the instrument.

The table below analyses financial instruments carried at fair value by using the valuation method. The different levels have been defined as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group’s financial assets and liabilities that are measured at fair value as at 31 December 2015.



68

The Company's assets measured at fair value as at 31 December 2015 are presented as follows:

Level 1 Level 2 Level 3 Total


Business property - - 700,869 700,869

Investment property - - 479,755 479,755

Equity securities 250,213 - 7,245 257,458

Debt securities 1,261,008 57,162 5,955 1,324,125

Investment funds 22,462 - 4,152 26,614

Available-for-sale financial assets 1,533,683 57,162 17,352 1,608,197

Equity securities 12,953 - - 12,953

Debt securities - 45,263 - 45,263

Investment funds 47,589 - - 47,589


60,542 45,263 - 105,805

Total assets at fair value 1,594,225 102,425 1,197,976 2,894,626

The Company's assets measured at fair value as at 31 December 2014 are presented as follows:






Debt securities 710,700 - - 710,700

Investment funds - - 23,902 23,902

Available-for-sale financial assets 1,005,862 - 28,661 1,034,523





290,775 - - 290,775

Total assets at fair value 1,296,636 - 1,259,615 2,556,251

The Company has adopted IFRS 13 pursuant to which it is required to disclose the fair value hierarchy of financial assets that are not measured at fair value as well as a description of valuation techniques and inputs used.

Loans and receivables (including bank deposits) have been reported at amortised cost, less impairment. Although they have been obtained on the basis of a fixed interest rate, the Management Board believes that, due to their specific features, the book value of these instruments is not significantly different from their fair value, provided that all payments arising from exposures without impaired value will be collected as agreed and without taking into account any future losses.

Financial liabilities have been reported at amortised cost. Although they have been agreed on the basis of a fixed interest rate, the Management Board believes that, due to the repayment of a majority of liabilities within a few days after the balance sheet date, the carrying value of these instruments is not significantly different from their fair value.

The fair value of loans and financial liabilities are estimated on the basis of inputs that are not commercially available rates and would therefore be classified as level 3 in the fair value hierarchy. Investments with available market prices that are classified in the portfolio of held-to-maturity investments would be classified as level 1.



69

The Group's assets measured at fair value as at 31 December 2015 are presented as follows:




Investment property - 718,459 718,459

Equity securities 252,772 72 7,880 260,724

Debt securities 1,617,900 88,709 5,955 1,712,564

Investment funds 25,081 - 4,152 29,233

Available-for-sale financial assets 1,895,753 88,781 17,987 2,002,521


Debt securities 65,442 45,263 - 110,705

Investment funds 89,182 977 - 90,159

Financial assets at fair value through profit or loss 167,757 46,240 - 213,997

Total assets at fair value 2,063,510 135,021 1,624,711 3,823,242

The Group's assets measured at fair value as at 31 December 2014 are presented as follows:







Investment funds - - 23,902 29,216

Available-for-sale financial assets 1,231,211 - 26,148 1,262,670





440,269 - - 440,269

Total assets at fair value 1,671,480 - 1,683,226 3,354,706

Fair value of property An independent valuation of the Group’s property was performed by external appraisers to determine its fair value as at 31 December 2015 and 2014. The estimation of fair value of business property was carried out by external appraisers in 2014. Valuation techniques used to derive level 3 fair values Fair values of investment property have been derived primarily by using comparative and income approaches, and sometimes because of the lack of information on market parameters by using the cost method, depending on the relevant asset. The fair values of property for own use have been derived primarily by using the income approach. The most significant inputs in this valuation approach were prices or rental income per square meter generated by comparable property in close proximity, which were then adjusted for differences in key attributes.



70

Information on fair value measurement of investment property by applying significant unobservable inputs (Level 3)

Description

Fair value at 31

December 2015

Fair value at 31

December 2014

Valuation techniques

Unobservable inputs

The range of invisible inputs

2015 2014

Group 479,755

514,715

Income approach

Capitalization rate

7.5%-9.8% 7.5%-10%

Discount

rate 8%-10% 6%-11%

Cost approach

Unit price of construction

per m2 (HRK)

395-11,590 430-2,765

Xomparative approach

Average price per m2

(HRK) 1-15,000 1-16,765

Other companies

in the Group

238,704 236,687

Income approach

Capitalization rate

6.5%-11% 8%-11%

Discount

rate 10% 8%-9.5%

Comparative approach

Average price per m2

(HRK) 1,125-21,700 1,125-23,000

Total 718,459 751,402

A significant increase (decrease) in the estimated capitalization rate, unit prices of construction and the average price per m2, withall other variables held constant, would lead to a significant increase (decrease) in the fair value of investment property. A significant increase (decrease) of the discount rate, with all other variables held constant, would lead to a significant decrease (increase) in the fair value of investment property. There is no significant interrelationship between unobservable inputs used in the estimates that would have a significant effect on the fair value.



71

2.38. Capital risk management

The Company's main objectives in managing capital are as follows:

Compliance with laws and by-laws, regulations and instructions of the regulatory body governing capital management

Ensuring that the Company continues as a going concern

Facilitating the generation of profit for further investment in the development of the Company

The Company complies with laws and by-laws that regulate capital, regulatory capital, capital adequacy and solvency margin.

As at 31 December 2015 and 31 December 2014, regulatory capital of the Company was higher than the minimum sharecapital required by Article 19 of the Insurance Act, as well as than the solvency margin calculated in accordance with Article 98 of the Insurance Act, as shown in the following table:

31 December 2015 31 December 2014

Life Non-life Life Non-life


Core capital

Share capital 44,289 545,037 44,289 545,037

Reserve 83,803 993,214 83,803 1,110,686

Retained earnings 15,303 1,423 19,759 290,918

Intangible assets - (14,334) - (10,828)

Accumulated loss and loss for the year

- - (4,456) (408,389)

143,395 1,525,341 143,395 1,527,423

Supplementary capital

Preference shares - 12,250 - 12,250

Mathematical provision differences 6,863 - 8,098 -

Fair value reserve - - - -

6,863 12,250 8,098 12,250

Regulatory capital (RC) 150,259 1,537,591 151,493 1,539,673

Deductible items Shares in associates - (345,389) - (323,229)

Investments in subordinate instruments -

- - -

Non-liquid assets - (8,642) - (28,257)

- (354,030) - (351,486)

Capital 150,259 1,183,560 151,493 1,188,187

Solvency margin 102,320 342,692 94,106 343,743

Minimum equity 28,860 28,860 28,860 28,860

RC >= min. equity Yes Yes Yes Yes

Capital >= Solvency margin Yes Yes Yes Yes

Pursuant to the Decision of the Croatian Financial Services Supervisory Agency, Class: UP/I-453-02/09-31/04, Reg. no.: 326-402-09-7 dated 7 May 2009, CROATIA osiguranje d.d. was given consent to include into the calculation of supplementary capital for the life insurance group the value of the mathematical provisions whose calculation does not take into account the actual acquisition cost, or part of the actual acquisition cost less the value of the mathematical provisions whose calculation takes into account the actual acquisition cost, whereby the actual insurance acquisition costs in the calculation of mathematical provisions may not exceed 3.5% of the insured sum for the Special tariff for life insurance in case of death or survival.



72

3. Segment reporting

The Company's statement of comprehensive income by business segments for the year is as follows:

2015 2015 2015 2014 2014 2014


NON-LIFE LIFE TOTAL NON-LIFE LIFE TOTAL

Gross written premiums 1,787,938 513,508 2,301,445 1,862,713 366,589 2,229,302

Premiums ceded to reinsurance (258,388) (397) (258,784) (309,801) (247) (310,048)

───── ───── ───── ───── ───── ─────

Written premiums, net of reinsurance 1,529,550 513,111 2,042,661 1,552,912 366,342 1,919,254

Change in gross provisions for unearned premiums 23,177 (1,115) 22,062 122,509 145 122,654

Change in provisions for unearned premiums, reinsurance share (8,266) - (8,266) (7,784) (1) (7,785)

───── ───── ───── ───── ───── ─────

Earned premiums, net of reinsurance 1,544,461 511,995 2,056,457 1,667,637 366,486 2,034,123

Commission and fee income 33,311 16 33,328 22,442 8 22,450

Finance income 236,971 119,047 356,018 215,238 120,886 336,124

Other operating income 55,811 116 55,927 68,237 554 68,791

───── ───── ───── ───── ───── ─────

Net operating income 1,870,555 631,175 2,501,730 1,973,554 487,934 2,461,488

───── ───── ───── ───── ───── ─────

Claims incurred (1,010,700) (492,773) (1,503,473) (1,198,228) (375,176) (1,573,404)

Reinsurance share in claims incurred 79,715 (49) 79,665 168,242 34 168,276

───── ───── ───── ───── ───── ─────

Claims incurred, net of reinsurance (930,985) (492,822) (1,423,808) (1,029,986) (375,142) (1,405,128)

Acquisition costs (323,351) (55,523) (378,874) (331,853) (36,840) (368,693)

Administrative expenses (382,591) (51,325) (433,916) (639,234) (78,061) (717,295)

Other operating expenses (38,793) (339) (39,132) (169,444) (717) (170,161)

Finance costs (131,737) (27,209) (158,946) (310,961) (2,672) (313,633)

───── ───── ───── ───── ───── ─────

Profit/(loss) before tax 63,098 3,956 67,054 (507,924) (5,498) (513,422)

Income tax (18,305) (1,978) (20,283) 99,535 1,042 100,577

───── ───── ───── ───── ───── ─────

Profit/(loss) for the year 44,793 1,978 46,771 (408,389) (4,456) (412,845)

════ ════ ════ ════ ════ ════



73

The Company's statement of financial position by business segments at the reporting date is as follows:

31 Dec. 2015 31 Dec. 2015 31 Dec. 2015 31 Dec. 2014 31 Dec. 2014 31 Dec. 2014


Assets NON-LIFE LIFE TOTAL NON-LIFE LIFE TOTAL

Intangible assets 14,334 - 14,334 10,828 - 10,828

Property and equipment

732,191 - 732,191 738,333 - 738,333

Investment property 479,755 - 479,755 514,715 - 514,715

Investments in subsidiaries, associates and participation in joint ventures

421,416 - 421,416 421,371 - 421,371

Held-to-maturity investments

875,848 1,209,820 2,085,668 848,512 1,395,070 2,243,583


863,224 744,974 1,608,197 701,409 333,114 1,034,523


12,953 92,853 105,805 176,374 114,400 290,774

Loans and receivables 1,257,630 403,892 1,661,522 1,272,190 403,492 1,675,682


306,498 271 306,769 339,095 321 339,416

Deferred tax assets 91,823 - 91,823 104,249 - 104,249

Insurance contract and other receivables

769,059 46,260 815,319 735,620 40,215 776,605

Cash and cash equivalents

31,448 26,912 58,360 70,799 30,376 101,175

Total assets 5,856,179 2,524,982 8,381,161 5,933,496 2,316,988 8,250,483

Equity

Sharecapital 557,287 44,289 601,576 557,287 44,289 601,576

Share premium 681,483 - 681,483 681,483 - 681,483

Reserves 311,732 83,803 395,535 429,203 83,803 513,007

Fair value reserve 137,674 4,296 141,970 161,183 10,398 171,581

Retained earnings 46,216 17,281 63,496 (117,472) 15,303 (102,169)

Total equity 1,734,391 149,669 1,884,060 1,711,685 153,793 1,865,478

Liabilities

Technical provisions 3,501,107 2,334,799 5,835,906 3,580,384 2,107,457 5,687,841

Provisions 94,753 12,757 107,510 221,280 27,211 248,491

Deferred tax liability - 752 752 - 299 299

Financial liabilities - - - - - -

Insurance contract and other liabilities and deferred income

525,928 27,005 552,933 420,148 28,227 448,375

Total liabilities 4,121,788 2,375,313 6,497,101 4,221,811 2,163,195 6,385,006

Total capital, reserves and liabilities

5,856,179 2,524,982 8,381,161 5,933,496 2,316,988 8,250,484



74

The Group's statement of comprehensive income by business segments for the year is as follows:

2015 2015 2015 2014 2014 2014


NON-LIFE LIFE TOTAL NON-LIFE LIFE TOTAL

Gross written premiums 2,357,701 601,917 2,959,619 2,371,413 439,979 2,811,392

Premiums ceded to reinsurance (278,468) (397) (278,865) (272,259) (477) (272,736)

───── ───── ───── ───── ───── ─────

Written premiums, net of reinsurance 2,079,233 601,521 2,680,754 2,099,154 439,502 2,538,656

───── ───── ───── ───── ───── ─────

Change in gross provisions for unearned premiums (2,413) (1,296) (3,709) 76,888 89 76,977

Change in provisions for unearned premiums, reinsurance share 10,225 75 10,300 (12,054) (11) (12,065)

───── ───── ───── ───── ───── ─────

Earned premiums, net of reinsurance 2,087,045 600,300 2,687,345 2,163,988 439,580 2,603,568

───── ───── ───── ───── ───── ─────

Commission and fee income 37,154 16 37,170 35,888 8 35,896

Finance income 323,415 131,078 454,493 288,051 134,593 422,644

Other operating income 155,047 302 155,349 158,869 716 159,585

───── ───── ───── ───── ───── ─────

Net operating income 2,602,661 731,696 3,334,357 2,646,796 574,897 3,221,693

───── ───── ───── ───── ───── ─────

Claims incurred (1,317,243) (560,955) (1,878,197) (1,466,224) (432,263) (1,898,487)

Reinsurance share in claims incurred 81,677 (49) 81,628 114,472 34 114,506

───── ───── ───── ───── ───── ─────

Claims incurred, net of reinsurance (1,235,565) (561,004) (1,796,569) (1,351,752) (432,229) (1,783,981)

───── ───── ───── ───── ───── ─────

Acquisition costs (422,469) (72,953) (495,423) (435,042) (51,580) (486,622)

Administrative expenses (618,153) (58,808) (676,961) (836,397) (86,552) (922,949)

Other operating expenses (73,365) (654) (74,019) (211,579) (1,172) (212,751)

Finance costs (121,484) (28,618) (150,101) (367,081) (4,889) (371,970)

───── ───── ───── ───── ───── ─────

Profit /(loss) before tax 131,624 9,659 141,284 (555,055) (1,525) (556,580)

Income tax (28,810) (2,722) (31,533) 90,455 433 90,888

───── ───── ───── ───── ───── ─────

Profit /(loss) for the year 102,814 6,937 109,751 (464,600) (1,092) (465,692)

════ ════ ════ ════ ════ ════



75

The Group's statement of financial position by business segments at the reporting date is as follows:

31 Dec. 2015

31 Dec. 2015 31 Dec. 2015 31 Dec. 2014 31 Dec. 2014 31 Dec.

2014

in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000

Assets NON-LIFE LIFE TOTAL NON-LIFE LIFE TOTAL

Intangible assets 25,303 207 25,509 44,729 239 44,968

Property and equipment 926,001 17,579 943,580 957,869 18,151 976,020

Investment property 717,420 1,038 718,459 750,352 1,050 751,402 Investments in subsidiaries,

associates and participation in joint ventures 81,653 - 81,653 71,403 - 71,403

Held-to-maturity investments 1,031,382 1,284,100 2,315,482 1,021,039 1,465,880 2,486,919

Available-for-sale financial assets 1,197,084 805,438 2,002,521 893,690 363,670 1,257,360 Financial assets at fair value

through profit or loss 115,056 98,941 213,997 325,444 114,822 440,266

Loans and receivables 1,532,882 529,929 2,062,811 1,604,049 537,355 2,141,404

Reinsurance share in technical provisions 163,322 352 163,674 144,526 326 144,852

Deferred tax assets 105,879 - 105,879 118,490 - 118,490 Insurance contract and other

receivables 1,008,282 70,799 1,079,081 925,958 45,647 971,605

Cash and cash equivalents 106,866 29,291 136,156 131,366 34,012 165,378

Total assets 7,011,130 2,837,674 9,848,804 6,988,915 2,581,152 9,570,067

Equity Share capital 557,287 44,289 601,576 557,287 44,289 601,576

Share premium 681,483 - 681,483 681,483 - 681,483

Reserves 311,732 83,803 395,535 430,942 83,804 514,746

Fair value reserve 193,979 5,478 199,457 235,090 11,713 246,803

Retained earnings 358,810 39,685 398,494 123,349 28,214 151,563

Equity attributable to owners of the parent 2,103,290 173,255 2,276,545 2,028,151 168,020 2,196,171

Non-controlling interest 12,969 1,628 14,597 26,971 8,102 35,073

Total equity 2,116,260 174,882 2,291,142 2,055,122 176,122 2,231,244

Liabilities Technical provisions 4,137,931 2,578,211 6,716,142 4,175,082 2,315,366 6,490,448

Provisions 116,107 12,781 128,888 233,910 27,223 261,133

Deferred tax liability 23,776 830 24,607 31,618 299 31,917

Financial liabilities 1,555 174 1,729 31,229 298 31,527 Insurance contract and other

liabilities and deferred income 615,500 70,796 686,296 461,954 61,844 523,798

Total liabilities 4,894,870 2,662,792 7,557,661 4,933,793 2,405,030 7,338,823

Total equity and liabilities 7,011,130 2,837,674 9,848,804 6,988,915 2,581,152 9,570,067



76

The measurement of the assets and liabilities segment and the revenues and result segments is based on the accounting policies set out in the notes on accounting policies.

The Group's main business segments are non-life and life insurance.

Segment results, assets and liabilities include items directly attributable to the segment as well as those that are allocated on a reasonable basis.

The main products offered by the reportable business segments include:

Non-life: Accident insurance

Health insurance

Road motor vehicle insurance

Railroad rolling stock insurance

Aircraft insurance

Vessel insurance

Insurance for goods in transit

Insurance against fire and natural disasters

Other types of property insurance

Motor liability insurance

Aircraft liability insurance

Vessel liability insurance

Other types of liability insurance

Loan insurance/credit insurance

Surety insurance

Miscellaneous financial loss insurance

Travel insurance

Life:

Life insurance

Annuity insurance

Additional insurance with life insurance

Life or annuity insurance where the policyholder bears the investment risk

Geographical segments

The Group mainly operates in Croatia. The majority of income from insurance contracts is generated from clients in the Republic of Croatia.



77

4. Premiums

Company Company

Group Group

2015 2014

2015 2014

TOTAL LIFE AND NON-LIFE in HRK'000 in HRK'000


Gross written premiums 2,307,929 2,279,905

2,968,220 2,869,266

Impairment and collected amounts previously impaired

(6,484) (50,603)

(8,601) (57,874)


2,959,619 2,811,392

Domestic reinsurance premium (20,010) (283,239)

(412) -

Foreign reinsurance premium (237,168) (26,808)

(276,646) (272,735)

Domestic coinsurance premium (1,606) - (1,804) -

Foreign coinsurance premium - - (3) -

Premiums ceded to reinsurance (258,784) (310,048)

(278,865) (272,735)

Written premiums, net of reinsurance 2,042,661 1,919,254

2,680,754 2,538,656

Gross provisions for unearned premiums 22,062 122,654

(3,709) 76,977

Provisions for unearned premiums, reinsurance share

(8,488) (7,785)

10,894 (12,065)

Provision for unearned premiums, coinsurance share

222 -

(594) -

Change in provisions for unearned premiums 13,796 114,869

6,591 64,912

Earned premiums, net of reinsurance 2,056,457 2,034,123

2,687,345 2,603,568

Company Company

Group Group

2015 2014

2015 2014

LIFE in HRK'000 in HRK'000


Gross written premiums 513,508 366,589

601,918 439,979

Domestic reinsurance premium (136) (247)

(136) -

Foreign reinsurance premium (261) -

(261) (477)

Premiums ceded to reinsurance (397) (247) (397) (477)

Written premiums, net of reinsurance 513,111 366,342

601,521 439,501

Gross provisions for unearned premiums (1,115) 145

(1,296) 89


- -

75 (11)

Change in provisions for unearned premiums (1,115) 145

(1,221) 78

Earned premiums, net of reinsurance 511,996 366,486

600,300 439,579



78

Company Company

Group Group

2015 2014

2015 2014

NON-LIFE in HRK'000 in HRK'000



2,366,302 2,429,287

Impairment and collected amounts previously impaired

(6,484) (50,603)

(8,601) (57,874)

Gross written premium 1,787,937 1,862,713

2,357,701 2,371,413

Domestic reinsurance premium (19,874) (282,992)

(276) -

Foreign reinsurance premium (236,907) (26,808)

(276,385) (272,258)

Domestic coinsurance premium (1,606) - (1,804) -

Foreign coinsurance premium - - (3) -

Premiums ceded to reinsurance (258,387) (309,801) (278,468) (272,258)

Written premiums, net of reinsurance 1,529,550 1,552,912

2,079,233 2,099,155

Gross provision for unearned premiums 23,177 122,508

(2,413) 76,887


(8,488) (7,784)

10,819 (12,053)

Provisions for unearned premiums, coinsurance share

222 - (594) -

Change in provisions for unearned premiums 14,911 114,724

7,812 64,834

Earned premiums, net of reinsurance 1,544,461 1,667,636

2,087,045 2,163,989

5. Commission and fee income

Commission and fee income in the amount of HRK 33,328 thousand (2014: HRK 22,450 thousand) for the Company, and HRK 37,170 thousand (2014.: HRK 35,896 thousand) for the Group, relates to commissions from reinsurance companies under reinsurance contracts.



79

6. Finance income

Company Company

Group Group

2015 2014

2015 2014



Interest income 232,579 214,785

267,771 250,077

Dividend income 17,577 26,624

21,310 16,620

Income from investment property 38,546 55,116

76,098 87,074

Foreign exchange gains 20,970 16,750

34,929 32,100 Realised gains from financial assets 13,655 5,574

14,918 10,444

Unrealised gains from financial assets at fair value through profit or loss 1,117 10,925

3,103 11,119

Collection of amounts previously impaired 23,939 3,400

27,120 6,416 Other income 7,635 2,951

9,244 8,794

356,018 336,124

454,493 422,644

6.1. Interest income

Company Company

Group Group

2015 2014

2015 2014



Interest income

Held-to-maturity investments 120,916 128,414

130,897 136,917

Available-for-sale financial assets 41,064 16,842

52,954 20,909

Investments at fair value through P&L 535 6,655

1,477 6,655

Deposits 48,022 36,907

60,523 57,158

Loans and other placements 22,042 25,967

21,920 28,437

232,579 214,785 267,771 250,077

6.2. Income from investment property

Company Company

Group Group

2015 2014

2015 2014



Income from investment property Rental income 24,949 25,657

53,767 54,908

Income from increase in the value of land and buildings (Note 17) 13,597 29,406

22,331 32,113

Income from sale of land and buildings - 53

- 53

38,546 55,116 76,098 87,074



80

6.3. Realised gains from financial assets

Company Company

Group Group

2015 2014

2015 2014



Realised gains from financial assets

Financial assets at fair value through profit and loss 3,701 5,163

6,662 9,188

Financial assets available for sale 6,569 411

8,256 1,256

Investments in subsidiaries (Note 18) 3,385 - - -

13,655 5,574 14,918 10,444

6.4. Foreign exchange gains

Company Company

Group Group

2015 2014

2015 2014



Foreign exchange gains Held-to-maturity investments 9 4,787

4,457 6,761 Available-for-sale financial assets 8,588 2,908

13,966 12,717 Investments at fair value through profit or

loss - 485

- 619 Deposits 6,248 5,194

7,872 7,116 Loans 1,742 1,299

1,953 1,097 Foreign currency accounts 4,383 2,075

6,667 3,354 Other - 2

14 438

20,970 16,750 34,929 32,100

7. Other operating income

Company Company

Group Group

2015 2014

2015 2014



Income from written off liabilities and collected receivables written off 1,429 4,805

1,796 12,806

Income from guarantee fund 929 12,555

929 12,555 Income from penalty interest 6,390 7,068

6,390 7,068 Income from claims incurred abroad 5,227 4,176

6,147 4,804 Revenue from service assessments 3,755 3,925

3,811 4,193 Income from reversal of long-term provisions (Note 26) 3,394 - 4,105 - Income from fees for border security 246 310

246 3,684 Revenue from the sale of tangible assets 57 49

232 398 Revenue from court settlement with the Republic of Croatia 20,384 -

20,384 -

Other income - insurance 14,116 35,903 33,207 38,970

Income from motor vehicle examination - - 62,421 57,018 Revenue from the provision of clinical medical services - - 12,893 12,786

Other income - non-insurance business - - 2,788 5,303

55,927 68,791

155,349 159,585



81

8. Claims incurred, net of reinsurance

Company Company

Group Group

2015 2014

2015 2014



Claims incurred 1,503,473 1,573,404

1,878,197 1,898,487

Reinsurance and coinsurance share in claims incurred (79,665) (168,276)

(81,628) (114,506)

1,423,808 1,405,128

1,796,569 1,783,981

Company Company

Group Group

2015 2014

2015 2014

TOTAL LIFE AND NON-LIFE in HRK'000 in HRK'000


Expenditure for insured events, net 1,226,061 1,243,793

1,568,164 1,615,228

Settled claims 1,229,460 1,255,321

1,580,743 1,581,742

Gross amount 1,333,506 1,403,381

1,653,239 1,672,166

Coinsurance share (1,770) - (1,765) -

Reinsurance share (102,276) (148,061)

(70,731) (90,383)

Change in claims provisions (3,399) (11,527)

(12,579) 32,112

Gross amount (27,731) 8,654

(3,398) 56,160

Coinsurance share (532) -

(532) -

Reinsurance share 24,864 (20,181)

(8,650) (24,048)

Change in mathematical provision and other technical provisions, net of reinsurance

168,636 165,877

199,294 174,669

Change in mathematical provisions for insurance

194,557 116,549

229,951 143,919

Gross amount 194,508 116,583

229,901 143,953

Reinsurance share 49 (34)

49 (34)

Change in other technical provisions, net of reinsurance

(25,921) 49,328

(30,656) 30,750

Change in special provisions for life insurance where the policyholder bears the investment risk, net of reinsurance

29,111 (4,542)

29,111 (4,542)

Gross amount 1,503,473 1,573,404

1,878,197 1,898,487

Reinsurance and coinsurance share (79,665) (168,276)

(81,628) (114,506)



82

Company Company

Group Group

2015 2014

2015 2014

NON-LIFE in HRK'000 in HRK'000


Expenditure for insured events, net 956,906 980,659

1,266,222 1,321,002

Settled claims 962,754 992,572

1,281,417 1,289,894

Gross amount 1,066,800 1,140,633

1,353,913 1,380,318

Coinsurance share (1,770) -

(1,765) (41)

Reinsurance share (102,276) (148,061)

(70,731) (90,383)

Change in claims provisions (5,848) (11,913)

(15,195) 31,109

Gross amount (30,179) 8,268

(6,014) 55,157

Coinsurance share (532) -

(532) -

Reinsurance share 24,864 (20,181)

(8,650) (24,048) Change in mathematical provision and other technical provisions, net of reinsurance

(25,921) 49,328

(30,656) 30,750

Gross amount (25,921) 49,328

(30,656) 30,750

Gross amount 1,010,700 1,198,228

1,317,243 1,466,225

Reinsurance and coinsurance share (79,714) (168,242)

(81,628) (114,472)

Company Company

Group Group

2015 2014

2015 2014

LIFE in HRK'000 in HRK'000


Expenditure for insured events, net 269,154 263,135

301,942 292,851

Settled claims, gross 266,705 262,749

299,326 291,848

Change in claims provisions, gross 2,449 386

2,616 1,003

Change in mathematical provision and other technical provisions, net of reinsurance

194,557 116,549

229,951 143,919

Change in mathematical provisions for insurance

194,557 116,549

229,951 143,919

Gross amount 194,508 116,583

229,901 143,953


49 (34)


29,111 (4,542)

29,111 (4,542)

Gross amount 492,773 375,176

560,955 432,263


49 (34)

Company Company

Group Group

Settled claims - gross amount 2015 2014

2015 2014



Expenses for claims 1,342,842 1,425,409

1,661,326 1,694,307

Interest expense on claims 20,847 27,172

20,847 28,000

Claims paid 62,717 51,784

67,849 57,819

Collected recourses (105,320) (113,812)

(109,203) (120,789)

Recourse costs 12,420 12,828

12,420 12,828

1,333,506 1,403,381

1,653,239 1,672,166



83

9. Acquisition costs

Company Company

Group Group

2015 2014

2015 2014



Commission 212,973 227,781

270,019 254,128

Other acquisition costs 110,378 104,072

152,450 180,913

NON-LIFE 323,351 331,853

422,469 435,041

Commission 34,631 20,769

46,735 31,602


26,219 19,979

LIFE 55,523 36,840

72,954 51,581

Commission 247,604 248,549

316,754 285,730


178,669 200,892

TOTAL LIFE AND NON-LIFE 378,874 368,693

495,423 486,622

9.1. Commission

Company Company

Group Group

2015 2014

2015 2014



Commission expenses - agents 7,580 9,190

14,414 11,114

Commission expenses - employees 121,434 118,489

146,983 119,705

Commission for banks, agencies and brokers 118,590 120,870

155,357 154,911

247,604 248,549

316,754 285,730

9.2. Other acquisition costs

Company Company

Group Group

2015 2014

2015 2014



Costs of promotion 32,795 34,018

44,982 49,417 Cost of sales staff 94,964 73,502 120,517 105,589 Other direct acquisition costs 3,511 12,624

13,170 45,886

131,270 120,144

178,669 200,892



84

10. Administrative expenses

Company Company

Group Group

2015 2014

2015 2014



Amortisation and depreciation 37,685 42,085

53,941 62,263

Salaries, taxes and contributions from and on salaries

227,085 268,671

307,884 359,551

Other administration expenses 169,146 406,539

315,136 501,135

433,916 717,295

676,961 922,949

10.1. Amortisation and depreciation

Company Company

Group Group

2015 2014

2015 2014



Amortization(Note 15) 5,840 5,077

9,262 7,732

Depreciation 31,845 37,008

44,679 54,531

37,685 42,085

53,941 62,263

10.2. Salaries, taxes and contributions from and on salaries

Company Company

Group Group

2015 2014

2015 2014



Net salaries and compensations 127,093 150,367

176,632 201,526

Contributions from salaries 37,862 44,796

51,480 63,536

Taxes and surtaxes 28,787 34,058

36,866 42,227

Contributions on salaries 33,343 39,449

42,906 52,262

227,085 268,671

307,884 359,551



85

10.3. Other administrative expenses

Company Company

Group Group

2015 2014

2015 2014



Services 86,236 115,367

150,034 149,429 Vacation allowance to employees 8 4,255

1,064 4,881

Termination benefits (Note 26) 17,720 138,966

31,744 141,253 (Reversal) / provision for jubilee awards and termination benefits (Note 26) (34,416) 12,829

(35,838) 12,702

Other compensations to employees under collective agreements 16,691 26,200

17,797 27,799

Other provisions - 3,794

- 4,029

Provision for legal claims (Note 26) 2,523 9,071

3,731 9,400 Materials used 8,101 9,209

13,550 17,098 Energy consumed 12,958 12,495 19,103 15,263 Transportation to and from work 9,786 11,329

11,680 12,439

Insurance premiums 11,646 16,051

8,899 13,692

Representation costs 5,016 4,321

8,969 7,029

Commission costs of credit card companies 11,121 13,399 11,345 13,399 Other contributions and fees 13,819 12,935

24,806 14,264

Daily allowances and transportation expenses 2,538 1,981

3,817 3,291

Banking services 633 1,210 5,529 6,105

Other various costs and expenditures 4,765 13,128

38,906 49,062

169,146 406,539

315,136 501,135

11. Other operating expenses

Company Company

Group Group

2015 2014

2015 2014



Guarantee fund fee 8,299 4,782 21,475 12,958 Fee to Croatian Insurance Bureau 1,304 1,793

2,919 2,131

Fire Department fee 5,164 6,382

6,163 7,662 Fee to Croatian Financial Services Supervisory Agency 1,327 1,368

2,411 2,357

Contributions for health insurance from motor liability premium 10,084 13,891

17,212 19,579

Other insurance-technical expenses 1,983 30,330

6,541 38,071 Other expenses 9,236 120

9,447 2,789

Impairment - property and equipment (Note 16) - 105,120

4,842 105,120

Impairment of other receivables 1,735 6,375

3,009 22,083

39,132 170,161

74,019 212,751



86

12. Finance costs


2015 2014

2015 2014


Impairment of investments 130,138 300,765 107,065 337,334

Realised losses on investments 1,943 375 2,603 375

Foreign exchange losses 19,170 3,197 25,020 4,514

Unrealised losses on investments in financial assets at fair value through profit or loss 2,093 2,605 2,651 12,944

Payment transactions 4,128 4,649 4,583 3,994

Interest expense - leasing - 576 1,696 -

Cost of sold assets 52 648 52 648

Other investment costs 1,422 817 6,431 12,161

158,946 313,633 150,101 371,970

12.1. Impairment of investments


2015 2014

2015 2014


Investments in subsidiaries and associates (Note 18.3) 39,330 14,385 - 6,473

Available-for-sale financial assets 46,260 55,099 46,387 59,657 Held-to-maturity investments - 28,463 - 28,463 Impairment of loans given 315 28,990 2,189 64,155 Losses from changes in fair value of

property (Note 17) 44,233 173,828 58,489 178,585

130,138 300,765 107,065 337,334

12.2. Realised losses on investments


2015 2014

2015 2014


Realised losses on investments

Realised losses on available-for-sale financial assets 711 63 799 63

Realized losses on investments at fair value through profit or loss 1,232 312 1,804 312

1,943 375 2,603 375



87

12.3. Foreign exchange losses


2015 2014

2015 2014


Foreign exchange losses

Held-to-maturity investments 5,734 36 9,567 717 Available-for-sale financial assets 1,971 - 2,433 200 Assetss at fair value through profit or

loss 473 11 485

11 Deposits 7,035 1,867 7,277 1,927 Loans 834 566 1,069 566 Foreign currency accounts 3,123 716 3,804 766 Other - - 385 327

19,170 3,197 25,020 4,514



88

13. Income tax

Income tax is calculated in accordance with legal regulations on the tax base, which represents the difference between realised income and expenses in the accounting period for which the tax base is determined. The initial tax base was increased by non-deductible expenses and decreased by income in accordance with the tax regulations in effect in the countries of Group members.


2015 2014

2015 2014


Deferred tax expense / (income) (Note 21) 20,283 (100,577) 17,276 (98,304) Current tax expense - - 14,257 7,317

Tax (income)/expense for the year 20,283 (100,577) 31,533 (90,888)

The reconciliation between income tax and the profit/(loss) before tax reported in the income statement is set out below:


2015 2014

2015 2014


Profit /(loss) before tax 67,054 (513,422) 141,284 (556,580)

Income tax at 20% 13,411 (102,684) 28,257 (111,317)

Non-deductible expenses 22,012 85,747 25,830 139,634

Tax incentives and income not subject to tax (15,140) (83,640) (22,554) (119,305)

Tax (income)/expense for the year 20,283 (100,577) 31,533 (90,988) Effective tax rate 30.25% (19.59%) 22.32% (16.35%)

The Company has tax losses that can be carried forward for covering the Company's future profits. Tax losses of the Company that can be transferred to subsequent periods expire in 2019 and amount to HRK 92,904 thousand (2014 : HRK 141,610 thousand). In addition to tax loss in 2014, the Company has not generated tax losses in previous years which could be carried forward to future periods. The rest of the companies in the

Group have no significant tax losses to be carried forward for covering future profits. In accordance with current regulations, the Tax Administration may at any time inspect the books and records for a period of three years following the year in which the tax liability is reported and may impose additional tax liabilities and penalties. The Management Board is not aware of any circumstances which may give rise to a potential material liability in this respect.



89

14. Earnings per share

Group Group

2015 2014


Profit /(loss) for the year

109,751 (465,692)

════ ════

Weighted average of ordinary shares 420,947 340,826

════ ════

Earnings/(loss) per share attributable to the Company's shareholders

Basic and diluted loss per share in HRK

260,72 (1,366,37)

════ ════

For the purpose of calculating earnings per share, earnings are calculated as the profit for the current period attributable to shareholders of the Company. The number of ordinary shares is the weighted average number of ordinary shares in circulation during the year. The weighted average number of ordinary shares used for the calculation of basic earnings per share was 420,947 (2014: 340,826). In addition, since there is no effect of options, convertible bonds or similar effects, the weighted average number of ordinary shares used to calculate diluted earnings per share was the same as the one used to calculate basic earnings per share.



90

15. Intangible assets

Company

in HRK'000

Other intangible

assets Software

Intangible assets under construction Total

Cost At 31 December 2013 19,707 66,047 - 85,754

Additions 498 1,388 4,150 6,036

Transfer to use - 4,044 (4,044) -

Disposals or retirements (4,318) (3,592) - (7,910)

At 31 December 2014 15,887 67,887 106 83,880

Additions 40 9,693 (106) 9,627

Transfer to tangible assets (Note 16) (9,404) - - (9,404)

Disposals or retirements (2) (116) - (118)

At 31 December 2015 6,521 77,464 - 83,985

Accumulated amortisation

At 31 December 2013 15,918 55,065 - 70,983

Amortisation charge for 2014 780 4,297 - 5,077

Disposals (1,613) (1,395) - (3,008)

At 31 December 2014 15,085 57,967 - 73,052


Disposals - (11) - (11)

Transfer to tangible assets (Note 16) (9,230) - - (9,230)

At 31 December 2015 6,225 63,426 - 69,651

Net book value

At 31 December 2015 296 14,038 - 14,334

At 31 December 2014 802 9,920 106 10,828



91

Group

in HRK'000

Other intangible

assets Software

Intangible assets under construction Total

Cost

At 31 December 2013 55,685 91,497 860 148,042

Additions 498 4,172 4,315 8,984

Transfer to software - 4,057 (4,524) (467)

Transfer from tangible assets - (25) - (25) Impairment (13,495) - - (13,495)

Disposals or retirements (4,322) (4,362) - (8,684)

At 31 December 2014 38,366 95,339 651 134,356

Additions 4,112 10,055 100 14,267

Transfer to use - 572 (572) -

Disposals (43) (151) - (194) Transfer to tangible assets (Note 16) (13,410) - - (13,410)

Other transfers (20,191) (138) - (20,329) Foreign exchange differences arising on translation of financial statements of foreign oeprations (16) (53) (1) (70)

At 31 December 2015 8,818 105,624 178 114,620

Accumulated amortisation

At 31 December 2013 15,915 68,055 - 83,970


Disposals or retirements (1,613) (701) - (2,314)

At 31 December 2014 15,082 74,306 - 89,388 Amortisation charge for the year 2015 943 8,319 - 9,262

Impairment 2,297 - - 2,297 Transfer to tangible assets (Note 16) (12,566) - - (12,566)

Disposals or retirements (41) (143) - (184)

Other transfers 2,816 (1,864) - 952 Foreign exchange differences arising on translation of financial statements of foreign operations (9) (29) - (38)

At 31 December 2015 8,522 80,589 - 89,111

Net book value

At 31 December 2015 296 25,035 178 25,509

At 31 December 2014 23,284 21,033 651 44,968



92

16. Property and equipment

Company

in HRK'000

Cost Land Buildings

Equipment and furniture

Vehicles Other tangible

assets Assets under construction

Advances given

Total

At 31 December 2013 123,501 1,051,486 165,504 456 4,214 14,674 - 1,359,835 Change in fair value (24,858) (51,735) - - - - - (76,593) Impairment (Note 11) (20,360) (120,670) (2,100) (200) - (716) - (144,046) Additions 632 9,011 2,279 196 58 22,052 532 34,760 Transfer from assets under construction - 35,505 - - - (35,505) - - Transfer from buildings to land 3,492 (3,492) - - - - - - Transfer to investment property (Note 17) - (2,017) - - - - - (2,017) Disposals - (117) (13,976) (86) - - - (14,179)

At 31 December 2014 82,407 917,971 151,707 366 4,272 505 532 1,157,760 Change in fair value - 2,541 3,993 189 - 12,860 - 19,583 Transfer from assets under construction - - 544 - - (17) (527) - Transfer from intangible assets (Note 15) - - - - 9,404 - - 9,404 Transfer to investment property (Note 17) - 6,174 - - - - - 6,174 Disposals - (89) (760) (76) - - - (925)

At 31 December 2015 82,407 926,597 155,484 479 13,676 13,348 5 1,191,996

Accumulated depreciation and impairment

At 31 December 2013 - 294,828 140,370 261 379 - - 435,838 Depreciation on revaluation effect - 3,075 - - - - - 3,075 Depreciation charge for the year - 25,695 8,145 37 56 - - 33,933 Impairment (Note 11) - (38,926) - - - - - (38,926) Transfer to investment property (Note 17) - (512) - - - - - (512) Disposals - (23) (13,951) (8) - - - (13,982)

At 31 December 2014 - 284,137 134,564 290 435 - - 419,426 Depreciation on revaluation effect - 1,450 - - - - - 1,450 Depreciation charge for the year - 22,548 7,745 46 56 - - 30,395 Transfer from intangible assets (Note 15) - - - - 9,230 - - 9,230 Disposals - - (661) (35) - - - (696)

At 31 December 2015 - 308,135 141,648 301 9,721 - - 459,805

Net book value

At 31 December 2015 82,407 618,462 13,836 178 3,955 13,348 5 732,191

At 31 December 2014 82,409 633,832 17,143 76 3,836 505 532 738,333



93

Group

in HRK'000

Cost Land Buildings Equipment and

furniture Vehicles Other tangible assets Assets under construction

Advances given Total

At 31 December 2013 155,782 1,273,115 272,061 10,121 61,222 25,316 2,547 1,800,164

Change in fair value (27,808) (64,878) - - - - - (92,686) Impairment (Note 11) (21,339) (118,552) (2,098) - - (3,044) - (145,033) Additions 2,431 7,470 9,498 245 - 22,659 1,312 43,615 Transfer from assets under construction - 35,858 - - - (35,858) - - Transfer from buildings to land 2,552 (2,552) - - - - - - Transfer to investment property - (7,230) - - - (356) - (7,586) Foreign exchange differences arising on translation of financial statements of foreign operations

7 (228) 109 38 1,140 19 (37) 1,048

Disposals - (2,328) (16,015) (763) (20,620) - - (39,726)

At 31 December 2014 111,625 1,120,675 263,555 9,641 41,742 8,736 3,822 1,559,796 Change in fair value - 77 - - - - - 77 Impairment (Note 11) - (503) - - - - - (503) Additions 128 2,587 5,383 585 87 16,210 - 24,980 Transfer from assets under construction - 2,624 1,722 - 3,306 (3,851) (3,801) - Transfer from investment property (Note 17) 5,669 31,270 - - - - - 36,939 Transfer to investment property (Note 17) (4,229) (33,272) - - (6,909) (7,608) - (52,018) Transfer from intangible assets (Note 15) - - - - 13,410 - - 13,410 Foreign exchange differences arising on translation of financial statements of foreign operations (2) (173) (128) (30) (95) - - (428) Disposals (2,256) (7,916) (12,211) (1,684) (2,192) - - (26,259)

At 31 December 2015 110,935 1,115,369 258,321 8,512 49,349 13,487 21 1,555,994 Accumulated depreciation and impairment

At 31 December 2013 - 335,867 224,846 7,196 21,128 - - 589,037 Depreciation on revaluation effect - 2,971 - - - - - 2,971 Depreciation charge for the year - 30,793 16,720 1,156 2,890 - - 51,559 Impairment (Note 11) (39,913) - - - - - (39,913) Transfer to investment property - (512) - - - - - (512) Foreign exchange differences arising on translation of financial statements of foreign operations

- 17 249 9 - - 275

Disposals - (2,018) (16,015) (970) (638) - - (19,641)

At 31 December 2014 - 327,205 225,800 7,391 23,380 - - 583,776 Depreciation on revaluation effect - 4,448 - - - - - 4,448 Depreciation charge for the year - 24,868 13,565 848 950 - - 40,231 Impairment - - - - 4,339 - - 4,339 Transfer from intangible assets (Note 15) - - - - 12,566 - - 12,566 Transfer to investment property (Note 17) 46 (13,752) - - - - - (13,706) Foreign exchange differences arising on translation of financial statements of foreign operations - (18) (87) (17) (54) - - (176) Disposals - (4,758) (11,148) (1,683) (1,475) - - (19,064)

At 31 December 2015 46 337,993 228,130 6,539 39,706 - - 612,414 Net book value

At 31 December 2015 110,889 777,376 30,191 1,973 9,643 13,487 21 943,580

At 31 December 2014 111,625 793,470 37,755 2,250 18,362 8,736 3,822 976,020



94

The Group has appointed an independent appraiser in 2014 who performed the appraisal of the value of land and buildings. The result of value appraisal or impairment loss was recorded as a reduction of the fair value

reserve up to the amount of revaluation surplus for the relevant asset. The impairment loss above the amount of fair value reserve was charged to the statement of comprehensive income.

The carrying amount of land and buildings that would have been recognised had the assets been carried under the cost model is HRK 622,381 thousand (31 December 2014: HRK 636,451 thousand) for the Company and HRK 730,939 thousand (31 December 2014: HRK 765,770 thousand) for the Group.

17. Investment property

Company

Group

in HRK'000

in HRK'000

At 31 December 2013 656,118

892,082

Foreign exchange differences arising on translation of financial statements of foreign operations -

(289)

Transfer from property and equipment 1,505

7,074

Increase in fair value credited the income statement (Note 6.2) 29,406

32,113

Decrease in fair value charged to the income statement (Note 12.1) (173,828)

(178,585)

Assets under construction 53

53

Additions 11,592

11,808

Disposals (10,131)

(12,854)

At 31 December 2014 514,715

751,402 Foreign exchange differences arising on translation of financial statements of foreign operations - (210)

Transfer from property and equipment (Note 16) - 38,312

Transfer to property and equipment (Note 16) (6,174) (36,939)

Increase in fair value credited to the income statement (Note 6.2) 13,597 22,331

Decrease in fair value charged to the income statement (Note 12.1) (44,233) (58,489)

Additions 1,852 2,464

Disposals (2) (412)

At 31 December 2015 479,755 718,459

The Group measures investment property in accordance with IAS 40 - Investment Property, by applying the fair value model. Accordingly, the Group recognises profit or loss arising from changes in the fair value of investment property as profit or loss for the period in which it occurred, based on the appraisal by independent appraisers.



95

18. Investments in subsidiaries, associates and participation in joint ventures

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014

in HRK '000 in HRK '000


Investments in subsidiaries 610,501 579,026

- -

Impairment of investments in subsidiaries

(221,345) (189,915)

- -

389,156 389,111

- -

Investments in joint ventures 28,000 28,000

65,416 59,771

Investments in associates 8,709 8,709

21,991 20,508

Impairment of investments in associates

(4,449) (4,449)

(5,754) (8,877)

4,260 4,260

16,237 11,632

421,416 421,371

81,653 71,403

18.1. Investments in subsidiaries and associates and participation in joint ventures for the Company were as follows:

31 Dec. 2015 31 Dec. 2014

Ownership Amount of Ownership Amount of

Activity Country percentage investment percentage investment

% in HRK '000 % in HRK '000

Subsidiaries

Croatia Lloyd d.d., Zagreb Reinsurance Croatia 100.0 125,689 100.0 125,689 Croatia zdravstveno osiguranje d.d., Zagreb Insurance Croatia

66.2 29,363 66.2 29,363

Milenijum osiguranje a.d., Beograd Insurance Serbia

99.9 46,380 99.9 46,380

Croatia Sigurimi sh.a., Prishtina Insurance Kosovo

100.0 - 100.0 20,375

Croatia osiguranje d.d., Ljubuški Insurance

Bosnia and Herzegovina

94.3 50,685 52.1 8,150

Croatia osiguranje - život a.d, Skopje Insurance Macedonia

95.0 22,271 95.0 22,271

Croatia osiguranje - neživot a.d., Skopje Insurance Macedonia

100.0 32,204 100.0 32,204

Croatia-Tehnički pregledi d.o.o., Zagreb

Motor vehicle examination Croatia

100.0 71,767 100.0 71,767

Herz d.d., Požega Motor vehicle examination Croatia

- - 100.0 22,100

Slavonijatrans-tehnički pregledi d.o.o., Slavonski Brod

Motor vehicle examination Croatia

- - 76.0 15

Croatia osiguranje, mirovinsko društvo d.o.o., Zagreb

Pension fund management Croatia

100.0 10,797 100.0 10,797

Razne usluge d.o.o., - currently being wound up Zagreb Services Croatia

100.0 - 100.0 -

389,156 389,111

Joint ventures

PBZ Croatia osiguranje d.d., Zagreb

Pension fund management

Croatia 50.0 28,000 50.0 28,000

Associates

Brioni d.d., Pula Transport Croatia 25.6 4,260

25.6 4,260

Autoprijevoz d.d., Otočac Transport Croatia 28.3 -

28.3 -

4,260 4,260

421,416 421,371



96

(i) In April 2015 the Company sold a 100% share of the company Herz d.o.o. The purchaser was the subsidiary Croatia-Tehnički pregledi d.o.o. which is also engaged in the same activity as the company that was being sold. The purpose of the sale was intergroup restructuring in order to achieve better coordination and management of motor vehicle examination activities of the Group. The selling price is defined on the basis of an independent assessment of the company Herz and totaled HRK 22.100 thousand, which is equal to the book value of the share. (ii) In April 2015 the Company sold a 76% share in the company Slavonijatrans-tehnički pregledi d.o.o. the purchaser was the subsidiary Croatia-Tehnički pregledi d.o.o. which is also engaged in the same activity as the company that was being sold. The purpose of the sale was intergroup restructuring in order to achieve better coordination and management of motor vehicle examination activities of the Group. The selling price was defined on the basis of an independent assessment of the company Slavonijatrans-Tehnički pregledi. and amounted to HRK 3,400 thousand, so the Company achieved profit on this sale in the amount of EUR 3,385 thousand (Note 6.3). 18.2. Investments in subsidiaries and associates and participation in joint ventures for the Group

Group

31 Dec. 2015 31 Dec. 2014

Ownership Amount of Ownership Amount of

Activity Country percentage investment percentage investment

% in HRK '000 % in HRK '000

Joint ventures

PBZ Croatia osiguranje d.d., Zagreb Pension fund Croatia 50.0 63,900 50.0 58,223

Receivables from joint funds - HUO Insurance Croatia - 139 - 139

Nacionalni biro za osiguranje Skopje Insurance Macedonia - 1,377 - 1,409

65,416

59,771

Associates

Brioni d.d., Pula Transport Croatia 25.6 6,532 25.6 6,902

Autoprijevoz d.d., Otočac Transport Croatia 28.3 - 28.3 -

Strmec projekt d.o.o., Samobor Real estate Croatia 50.0 7,297 50.0 4,175

STP Agroservis d.o.o., Virovitica Technical testing and analysis Croatia

37.0 2,408 37.0 555

16,237 11,632

81,653 71,403

Summary financial information on subsidiaries with material non-controlling interests

Set out below are the financial information for the subsidiary Croatia osiguranje d.d., Ljubuški that has non-controlling interests that are material to the Group. Name Country 31 Dec. 2015 31 Dec. 2014 Croatia osiguranje d.d., Ljubuški Bosnia and Herzegovina 94.3% 52.1%

31 Dec. 2015 31 Dec. 2014


Balance of non-controlling interest as at reporting date 13,170 33,797 (Loss) / profit allocated to material non-controlling interests (897) 145



97

The disclosed summary financial information represent information before eliminations within the Group:

31 Dec. 2015 31 Dec. 2014

Summary report of financial position in HRK '000 in HRK '000

Property and equipment 65,669 37,352

Investment property 28,638 59,381

Financial assets 198,927 153,553

Other assets 116,310 93,481

Total assets 409,544 343,767

Technical provisions 297,523 268,477

Other liabilities 31,712 22,781


Total equity and liabilities 409,544 343,767

Summary statement of comprehensive income

Earned premiums, net of reinsurance 121,719 114,581

Claims incurred, net of reinsurance (75,041) (69,150)

Net investment result 6,781 6,530

Other expenses net (55,171) (51,327)

(Loss) / profit before tax (1,712) 635

Income tax (538) (324)

(Loss) / profit for the year (2,250) 312

Dividends paid to non-controlling interests - 558

During the year that ended 31 December 2015 the Group acquired part of the non-controlling interest in a subsidiary Croatia Osiguranje dd, Ljubuški. Purchase of the non-controlling interest had no effect on the change of control in a subsidiary. The impact of changes in the percentage ownership of the equity attributable to shareholders of the Company during the year is as follows:

in HRK '000

Book value of acquired non-controlling interests

19,328 Fee paid

(11,452)

Less: paid compensation recognized in equity

7,876



98

Summary financial information for joint ventures The following are summary financial information for PBZ Croatia Osiguranje dd, which are reported using the equity method.

Summary report of financial position 31 Dec. 2015 31 Dec. 2014


Financial ssets 110,783 99,807


Total assets 136,627 124,753

Liabilities 8,827 8,306

Capital and reserves 127,800 116,447

Total equity and liabilities 136,627 124,753

Summary report of comprehensive income Revenues 63,982 56,248

Expenses (29,789) (27,328)

Profit before tax 34,193 28,920

Income tax (6,840) (5,794)

Profit for the year 27,353 23,127

The reconciliation of presented summary financial information with the carrying value of shares in the joint venture

Summary financial information 31 Dec. 2015 31 Dec. 2014


Opening net assets at 1 January 116,447 112,320

Profit for the period 27,353 23,127

Dividends (16,000) (19,000)

Closing net assets 127,800 116,447

Interest in Joint venture @ 50% 63,900 58,223

Carrying value 63,900 58,223



99

18.3. Movements in investments in subsidiaries, associates and participation in joint ventures


31 Dec 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014

in HRK '000 in HRK '000 in HRK '000 in HRK '000

At 1 January 421,371 365,626 71,403 72,931

Increase in investments (i) 61,490 70,130 - -

Increase by equity method - - 10,283 2,900

Sale of shares (Note 18.1) (22,115) - - -

Decrease (ii) (39,330) (14,385) (33) (4,428)

At 31 December 421,416 421,371 81,653 71,403

(i) Increase in investments refers to: (a) investment in the company Croatia osiguranje dd, Ljubuški in the amount of HRK 42,535 thousand by which the Company increased its share in the company from 52.1% to 94.3%. and (b) investments in the company Croatia Sigurimi sh.a., Prishtina in the amount of HRK 18,955 thousand in order to increase the company's capital. (ii) Based on the lower value determined by the assessment of fair value, the investment in the company Croatia Sigurimi was impaired in the amount of HRK 39,330 thousand (Note 12.1).

19. Financial assets

Company Company

Group Group

31 De.c 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014




2,315,482 2,486,919

Available-for-sale financial assets 1,608,197 1,034,523

2,002,521 1,257,360

Financial assets at fair value through profit or loss – for trading

105,805

290,774

213,997

440,266

Loans and receivables 1,661,522 1,675,682

2,062,811 2,141,404

5,461,192 5,244,562

6,594,811 6,325,949



100

19.1. Overview of investments

As at 31 December 2015 the investment structure of the Company was as follows:

Company

Held-to-maturity

investments

Available-for-sale financial

assets

Financial assets at fair value through profit or loss - for

trading


Total

in HRK '000 in HRK '000 in HRK '000 in HRK '000 in HRK '000

Shares

Shares, listed on stock exchange - 253,076 12,953 - 266,029

Shares, not listed on stock exchange - 4,382 - - 4,382

- 257,458 12,953 - 270,411

Debt securities

Bonds of the Republic of Croatia 2,045,677 1,281,774 - - 3,327,451 Domestic corporate bonds 39,991 42,351 - - 82,342 Treasury bills - - 45,263 - 45,263

2,085,668 1,324,125 45,263 - 3,455,056

Investment funds

Open-ended investment funds - 26,614 13,007 - 39,621

Open-ended investment funds - assets for coverage of unit-linked products - - 34,582 - 34,582

- 26,614 47,589 - 74,203


Deposits with credit institutions - - - 1,361,856 1,361,856 Loans - - - 299,666 299,666

- - - 1,661,522 1,661,522

2,085,668 1,608,197 105,805 1,661,522 5,461,192



101

19.1. Overview of investments (continued)

As at 31 December 2014 the investment structure of the Company was as follows:

Company

Held-to-maturity

investments


assets

Financial assets at fair value through profit or loss – for

trading Loans and

receivables Total


Shares



- 299,921 14,722 - 314,643

Debt securities

Bonds of the Republic of Croatia 2,156,114 707,080 85,480 - 2,948,674

Domestic corporate bonds 77,548 - - - 77,548

Treasury bills 9,920 - - - 9,920

Commercial papers - 3,620 - - 3,620

2,243,583 710,700 85,480 - 3,039,763

Investment funds

Open-ended investment funds - 23,902 185,261 - 209,163

Open-ended investment funds - assets for coverage of unit-linked products

- - 5,312 - 5,312

- 23,902 190,573 - 214,475


Deposits with credit institutions - - - 1,447,677 1,447,677

Loans - - - 228,005 228,005

- - - 1,675,682 1,675,682

2,243,583 1,034,523 290,774 1,675,682 5,244,562



102


As at 31 December 2015 the investment structure of the Group was as follows:

Group

Held-to-maturity

investments


assets

Financial assets at fair value

through profit or loss – for

trading Loans and

receivables Total


Shares



- 260,724 13,133 - 273,857

Debt securities State bonds 2,232,889 1,666,630 65,442 - 3,964,961 Domestic corporate bonds 39,991 45,934 - - 85,925

Treasury bills 42,602 - 45,263 - 87,865

2,315,482 1,712,564 110,705 - 4,138,751

Investment funds Open-ended investment funds - 29,233 55,577 - 84,810


- - 34,582 - 34,582

- 29,233 90,159 - 119,392

Loans and receivables Deposits with credit institutions - - - 1,771,683 1,771,683

Loans - - - 291,128 291,128

- - - 2,062,811 2,062,811

2,315,482 2,002,521 213,997 2,062,811 6,594,811



103


As at 31 December 2014 the investment structure of the Group was as follows:

Group

Held-to-maturity

investments


assets

Financial assets at fair value through profit or loss – for

trading Loans and

receivables Total


Shares Shares, listed on stock exchange - 302,187 19,574 - 321,761


- 304,433 19,574 - 324,007

Debt securities State bonds 2,361,514 925,404 109,118 - 3,396,036

Domestic corporate bonds 82,019 - - 82,019

Treasury bills 43,386 - 26,448 - 69,834

Commercial papers - 3,620 - - 3,620

2,486,919 929,024 135,566 - 3,551,509

Investment funds Open-ended investment funds - 23,902 279,814 - 303,716


-

5,312 - 5,312

- 23,902 285,126 - 309,028

Loans and receivables Deposits with credit institutions - - - 1,869,905 1,869,905

Loans - - - 271,499 271,499

- - - 2,141,404 2,141,404

2,486,919 1,257,360 440,266 2,141,404 6,325,949



104

19.2. Financial investments exposed to credit risk

Company 31 Dec. 2015 31 Dec. 2014


Neither past due nor

impaired

Past due but not impaired Impaired

Impair-ment Total

Neither past due

nor impaired

Past due but not

impaired Impaired

Impair-ment Total

Held-to-maturity investments 2,085,668 - 65,908 (65,908) 2,085,668 2,243,583 - 65,908 (65,908) 2,243,583

Available-for-sale debt securities 1,324,125 - - - 1,324,125 710,700 - - - 710,700

Debt securities at fair value through profit or loss 45,263 - - - 45,263 85,480 - 2,590 (2,590) 85,480

Deposits 1,361,856 - - - 1,361,856 1,447,677 - - - 1,447,677

Loans and receivables 288,718 10,948 121,189 (121,189) 299,666 225,679 2,326 142,894 (142,894) 228,005

5,105,630 10,948 187,097 (187,097) 5,116,578 4,713,119 2,326 211,392 (211,392) 4,715,445

Group 31 Dec. 2015 31 Dec. 2014

in HRK '000 in HRK '000 in HRK '000


impaired

Past due but not impaired Impaired

Impair-ment Total

Neither past due

nor impaired

Past due but not

impaired Impaired

Impair-ment Total

Held-to-maturity investments 2,315,482 - 65,908 (65,908) 2,315,482 2,486,919 - 65,908 (65,908) 2,486,919

Available-for-sale debt securities 1,712,564 - - - 1,712,564 929,024 - - - 929,024

Debt securities at fair value through profit or loss 110,705 - - - 110,705 135,566 - 2,590 (2,590) 135,566

Deposits 1,771,683 - 1,000 (1,000) 1,771,683 1,869,905 - - - 1,869,905

Loans and receivables 242,686 48,442 230,705 (230,705) 291,128 239,626 31,873 251,896 (251,896) 271,499

6,153,120 48,442 297,613 (297,613) 6,201,562 5,661,040 31,873 320,394 (320,394) 5,692,913



105

19.3. Held-to-maturity investments


Movement in impairment losses 31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014


At 1 January 65,908 37,445 65,908 37,445

Incerase - 28,463 - 28,463

At 31 December 65,908 65,908 65,908 65,908

19.4. Loans


Maturity dates of granted loans: 31 Dec. 2015 31 Dec.

2014 31 Dec. 2015 31 Dec. 2014


Up to 1 year 235,437 182,832 262,431 228,112

From 1 to 5 years 64,229 45,173 27,991 42,394

More than 5 years - - 706 993

299,666 228,005 291,128 271,499


Movement of impairment of loans 31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014


At 1 January 142,894 121,621 251,896 201,495

Increase 126 24,258 1,700 56,357

Collection of impaired receivables (21,831) (2,985) (22,891) (5,956)

At 31 December 121,189 142,894 230,705 251,896



106

The structure of loans according to collaterals for the Company: 31 Dec. 2015 31 Dec. 2014

Neither past due

nor impaired Past due but not

impaired Past due and

impaired TOTAL Neither past due



impaired TOTAL

in HRK '000 in HRK '000 in HRK '000 in HRK '000 in HRK '000 in HRK '000 in HRK '000 in HRK '000

Vinculated life insurance policies 43,949 3,480 - 47,429 40,979 1,822 - 42,801 Mortgages and real estate fiduciaries 204,475 42 116,474 320,991 184,629 504 142,894 328,027 Other collaterals 40,294 7,426 4,715 52,435 70 - - 70

288,718 10,948 121,189 420,855 225,679 2,326 142,894 370,898

The structure of loans according to collaterals for the Group: 31 Dec. 2015 31 Dec. 2014


impaired Past due but not


impaired TOTAL Neither past due


impaired Past due and impaired TOTAL


Vinculated life insurance policies 48,908 3,657 104 52,669 44,782 1,945 35 46,762 Mortgages and real estate fiduciaries 152,848 37,290 186,306 376,444 190,834 28,710 250,933 470,477 Other collaterals 40,930 7,495 44,295 92,721 4,010 1,218 928 6,156

242,686 48,442 230,705 521,834 239,626 31,873 251,896 523,395

Quality of loans mainly depends on the quality of the collateral. The collateral which is seen as the best repayment guarantee is the vinculated life insurance policy issued by the Group. The vinculated life insurance policies almost fully covers the loan exposure. For neither past due nor impaired loans secured by mortgages, the mortgage is considered to be a secondary source of repayment only and does not impact the carrying value of the loan. However, past due but not impaired loans and receivables would be fully impaired if there were no collaterals.



107

19.5. Maturity analysis of assets covering mathematical provisions with liabilities from mathematical provision

For all financial assets except shares and units in funds the amounts included are contractual discounted cash flows and for insurance liabilities we disclosed estimated maturity of the amounts recognised in the statement of financial position. Maturities of shares and units in funds are disclosed at the best Management Board’s expectation regarding the realisation of those financial instruments.

Company - 31 December 2015 Up to 1 year 1-3 years 3-5 years 5-10 years 10 -15 years 15 -20 years 20 + years TOTAL in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000

Total assets for mathematical provisions coverage 193,421 456,808 667,239 994,635 24,118 - - 2,336,223

Held-to-maturity investments 7,226 220,223 434,991 547,380 - - - 1,209,820

Bonds 7,226 220,223 434,991 547,380 - - - 1,209,820

Available-for-sale financial assets - 34,522 231,412 447,255 24,118 - - 737,306

Bonds - 34,522 228,856 447,255 24,118 - - 734,750 Shares - 2,556 - - 2,556

Financial assets at fair value through P&L – for trading 58,270 - - - - - - 58,270

Treasury bills 45,263 - - - - - - 45,263 Units in funds 13,007 - - - - - - 13,007

Loans and deposits 101,056 202,063 837 - - 303,956

Deposits in banks 63,175 193,390 - - - - - 256,565 Loans 37,881 8,673 837 - - - - 47,391

Cash and cash equivalents 26,869 - - - - - - 26,869

Required mathematical provisions coverage, net of reinsurance

260,792 519,828 528,614 526,596 224,619 123,223 106,015 2,289,687

Mathematical provisions 237,197 519,828 528,614 526,596 224,619 123,223 106,015 2,266,092 Provisions for claims based on risk types which require the forming of mathematical provisions

23,595 - - - - - - 23,595

Maturity gap 67,371 63,019 (138,625) (468,039) 200,501 123,223 106,015 (46,535)



108

19.5. Maturity analysis of assets covering mathematical provisions with liabilities from mathematical provision (continued)

Company - 31 December 2014 Up to 1 year 1-3 years 3-5 years 5-10 years 10 -15 years 15 -20 years 20 + years Total


Total assets for mathematical provisions coverage 386,060 305,348 469,817 976,578 - - - 2,137,803

Held-to-maturity investments 170,233 160,934 271,538 782,444 - - - 1,385,150

Bonds 170,233 160,934 271,538 782,444 - - - 1,385,150

Available-for-sale financial assets - 31,958 120,845 163,069 - - - 315,872

Bonds - 21,100 120,845 163,069 - - - 305,014

Sharess - 10,858 - - - - - 10,858

Financial assets at fair value through P&L – for trading 36,090 10,880 - 31,065 - - - 78,036

Bonds - 10,880

31,065 - - - 41,945 Units in funds 36,090 - - - - - - 36,090

Loans and deposits 149,361 101,575 77,433 - - - - 328,369

Deposits in banks 115,000 93,953 76,615 - - - - 285,568

Loans 34,361 7,622 819 - - - - 42,801


Required mathematical provisions coverage, net of reinsurance 199,382 447,452 471,660 522,996 226,661 105,523 119,006 2,092,411

Mathematical provisions 178,507 447,452 471,660 522,996 226,661 105,523 119,006 2,071,535 Provisions for claims based on risk types which require the forming of mathematical provisions 20,875 - - - - - - 20,875

Maturity gap (186,678) 142,104 1,844 (453,582) 226,661 105,523 119,006 (45,392)



109

19.6. Maturity analysis of assets covering technical provisions except for mathematical provisions with insurance liabilities For all financial assets except shares and units in funds the amounts included are contractual discounted cash flows and for insurance liabilities we disclosed estimated maturity of the amounts recognised in the statement of financial position. Maturities of shares and units in funds are disclosed at the best Management Board’s expectation regarding the realisation of those financial instruments. Maturity analysis of assets covering technical provisions except for mathematical provisions with insurance liabilities as at 31 December 2015 is as follows:

Company Up to 1 year 1-3 years 3-5 years 5-10 years 10-15 years 15-20 years 20 and more years TOTAL

in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000

Assets for technical provisions coverage 783,057 1,018,555 527,404 428,939 58,807 - 389,924 3,206,690

Held-to-maturity investments 129,901 378,869 112,465 206,811 38,497 - - 866,543

Bonds 129,901 378,869 112,465 206,811 38,497 - - 866,543

Available-for-sale financial assets - 219,901 387,329 222,128 20,310 - - 849,668

Bonds - 195,757 171,838 195,514 20,310 - - 583,419

Shares - 24,144 215,491 - - - 239,635

Units in funds - - - 26,614 - - - 26,614

Financial assets at fair value through P&L – for trading -

3,928 9,025 - - - -

12,953

Shares - 3,928 9,025 - - - - 12,953

Units in funds - - - - - - - -

Loans and deposits 272,716 415,857 18,585 - - - 707,158

Deposits in banks 190,000 380,000 - - - - - 570,000

Other loans 82,716 35,857 18,585 - - - - 137,158

Property - - - - - - 389,924 389,924


Investments with consent of supervisory body 357,038 - - - - - - 357,038

Required coverage for technical provisions except for mathematical provisions, net of reinsurance

1,300,865 529,174 306,293 427,459 218,421 138,434 284,222 3,204,868

Provisions for unearned premiums 607,043 63,038 37,586 39,728 7,474 2,311 1,633 758,813

Claims provisions 636,423 458,117 265,629 385,768 210,144 135,566 282,187 2,373,834

Fluctuation provisions 6,844 212 7,056

Other technical provisions for insurance 50,555 7,807 3,078 1,963 803 557 402 65,165

Maturity gap 517,808 (489,381) (221,111) (1,480) 159,614 138,434 (105,706) (1,822)



110

19.6. Maturity analysis of assets covering technical provisions except for mathematical provisions with insurance liabilities (continued)

Maturity analysis of assets covering technical provisions except for mathematical provisions with insurance liabilities as at 31 December 2014 is as follows:

Company Up to 1 year 1-3 years 3-5 years 5-10 years

10 -15 years

15 -20 years

20 + years

TOTAL


Assets for technical provisions coverage 1,027,915 682,063 959,439 394,208 - - 419,614 3,483,240

Held-to-maturity investments 60,109 260,765 325,237 202,401 - - - 848,512

Bonds 60,109 260,765 325,237 202,401 - - - 848,512

Available-for-sale financial assets - 146,032 348,188 168,944 - - - 663,164

Bonds - 79,015 159,913 145,042 - - - 383,970

Shares - 67,017 188,274 - - - - 255,291

Units in funds - - - 23,902 - - - 23,902

Financial assets at fair value through P&L – for trading 81,649 20,672 29,214 22,862 - - - 154,398

Bonds - 20,672 18,096 22,862 - - - 61,630

Shares 3,604 - 11,118 - - - - 14,722

Units in funds 78,046 - - - - - - 78,046

Loans and deposits 446,502 254,594 256,800 - - - - 957,896

Deposits in banks 301,292 234,599 250,000 - - - - 785,891

Other loans 145,210 19,995 6,800 - - - - 172,005

Property - - - - - - 419,614 419,614


Investments with consent of supervisory body 375,782 - - - - - - 375,782

Required coverage for technical provisions except for mathematical provisions, net of reinsurance 1,421,097 535,856 304,951 486,844 208,760 160,308 132,842 3,250,659

Provisions for unearned premiums 639,496 57,182 34,339 32,151 5,854 2,084 1,502 772,608

Claims provisions 701,741 469,486 267,069 452,567 201,987 157,589 130,885 2,381,325

Fluctuation provisions 4,196 130 - - - - - 4,326

Other technical insurance provisions 75,663 9,059 3,542 2,126 919 636 455 92,400

Maturity gap 393,181 (146,207) (654,488) 92,637 208,760 160,308 (286,772) (232,581)

CROATIA osiguranje d.d., Zagreb Notes to financial statements for the year ended 31 December 2015

111

19.7. Currency analysis of assets covering mathematical provisions with insurance contract liabilities

The currency analysis of assets covering mathematical provisions with insurance contract liabilities as at 31 December 2015 was as follows:

HRK EUR Total

Company in HRK '000 in HRK '000 in HRK '000

Total assets for mathematical provisions coverage 238,854 2,097,367 2,336,221

Held-to-maturity investments 131,498 1,078,322 1,209,820

Bonds 131,498 1,078,322 1,209,820

Available-for-sale financial assets 26,674 710,632 737,306

Bonds 24,118 710,632 734,750

Shares 2,556 - 2,556

Financial assets at fair value through P&L – for trading 13,007 45,263 58,270

Bonds - - - Treasury bills - 45,263 45,263

Units in funds 13,007 - 13,007

Loans and deposits 60,290 243,666 303,956

Deposits in banks 55,000 201,565 256,565

Loans to policyholders 5,290 42,101 47,391

Cash and cash equivalents 7,385 19,484 26,869


14,423 2,275,264 2,289,687

Mathematical provisions 12,424 2,253,668 2,266,092

Provisions for claims based on risk types which require the forming of mathematical provisions

1,999 21,596 23,595

Difference (224,431) 177,897 (46,534)


112

19.7. Currency analysis of assets covering mathematical provisions with insurance contract liabilities

(continued) The currency analysis of assets covering mathematical provisions with insurance contract liabilities as at 31 December 2014 was as follows:

HRK EUR Total

Company in HRK '000 in HRK '000 in HRK '000

Total assets for mathematical provisions coverage 452,005 1,685,798 2,137,803

Held-to-maturity investments 197,829 1,187,322 1,385,150

Bonds 197,829 1,187,322 1,385,150


Bonds 21,100 283,914 305,014

Shares 10,858 - 10,858


Bonds 10,880 31,065 41,945




Loans to policyholders 4,872 37,930 42,801

Cash and cash equivalents 30,376 - 30,376


9,096 2,083,314 2,092,411

Mathematical provisions 6,366 2,065,169 2,071,535


2,731 18,145 20,876

Difference (442,908) 397,516 (45,392)


113

19.8. Currency analysis of assets covering technical provisions, except for mathematical provisions with insurance contract liabilities

The currency analysis of assets covering technical provisions, except for mathematical provisions with insurance contract liabilities as at 31 December 2015 is shown below:

Company HRK EUR and

other currencies

Total


Total assets for technical provisions coverage 2,468,874 737,814 3,206,688

Held-to-maturity investments 591,561 274,982 866,543

Bonds 591,561 274,982 866,543

Other securities - - -


Bonds 302,934 280,486 583,420

Shares 86,812 152,823 239,635



Bonds - - -

Shares 3,928 9,025 12,953

Units in funds - - -

Loans and deposits 707,158 - 707,158

Deposits in banks 570,000 - 570,000

Other loans 137,158 - 137,158

Property 389,924 - 389,924

Cash and cash equivalents 13,161 10,241 23,402

Investments with the consent of the supervisory body 346,782 10,256 357,038


2,976,216 228,652 3,204,868

Provisions for unearned premiums 656,867 101,944 758,812

Claims provisions 2,247,128 126,708 2,373,835

Fluctuation provisions 7,056 - 7,056

Other technical insurance provisions 65,165 - 65,165

Difference 507,342 (509,162) (1,820)


114

19.8. Currency analysis of assets covering technical provisions, except for mathematical provisions with insurance contract liabilities (continued)

The currency analysis of assets covering technical provisions except for mathematical provisions with insurance contract liabilities as at 31 December 2014 is shown below:

Company HRK EUR and

other currencies

Total


Total assets for technical provisions coverage 2,579,203 904,037 3,483,240

Held-to-maturity investments 522,945 325,567 848,512

Bonds 522,945 325,567 848,512

Other securities - - -


Bonds 191,663 210,403 402,066

Shares 67,017 188,274 255,291



Bonds 35,752 7,782 43,534

Shares 3,604 11,118 14,722




Other loans 172,005 - 172,005

Property 419,614 - 419,614

Cash and cash equivalents 63,874 - 63,874

Investments with the consent of the supervisory body 375,782 - 375,782


3,073,791 176,867 3,250,659

Provisions for unearned premiums 695,937 76,671 772,608

Claims provisions 2,281,129 100,196 2,381,325

Fluctuation provisions 4,326 - 4,326

Other technical insurance provisions 92,400 - 92,400

Difference 494,589 (727,170) (232,581)


115

19.9. Analysis of interest rates repricing dates

Company

31 Dec. 2015 Effective interest

rate Up to 1 year 1-3 years 3-5 years 5-10 years

Non-interest bearing

Total Fixed

interest rate

% in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 %

Investments in subsidiaries and associates

- - - - 421,416 421,416

Investment property - - - - 479,755 479,755

Bonds 5.67 146,432 599,093 547,456 792,688 - 2,085,668 5.78

Held-to-maturity investments 146,432 599,093 547,456 792,688 - 2,085,668 Bonds 4.12 - 230,279 400,694 693,152 - 1,324,125 5.07

Shares - - - - - 257,458 257,458 -

Units in funds - - - - - 26,614 26,614 -

Available-for-sale financial assets - 230,279 400,694 693,152 284,072 1,608,197 -

Shares - - - - - 12,953 12,953 -

Treasury bills 1.94 45,263 - - - 45,263 1.94

Units in funds - - - - - 13,007 13,007 -

Financial assets at fair value through P&L – for trading

45,263 - - -

25,960 71,223

Deposits in banks 3.06 253,175 1,108,681 - - - 1,361,856 3.06

Loans 7.38 235,438 44,806 19,422 - - 299,666 7.38

Deposits, loans and receivables - 488,613 1,153,487 19,422 - - 1,661,522 -

Total financial assets - 680,308 1,982,859 967,572 1,485,840 310,033 5,426,611 -

Liabilities arising from direct insurance - 88,701 11,952 6,092 7,947 - 114,691 - Other liabilities - 107,036 - - 5,232 - 112,268 -

Total financial and other liabilities (other than liabilities to non-controlling unitholders in investment funds)

195,737 11,952 6,092 13,179 -

226,960

Interest rate risk gap 484,571 1,970,907 961,480 1,472,661 310,032 5,199,651


116

31 Dec. 2014 Effective interest

rate Up to 1 year 1-3 years 3-5 years 5-10 years

Non-interest bearing

Total Fixed

interest rate

% in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 %

Investments in subsidiaries and associates

- - - - 421.371 421.371 -

Investment property

- - - - 514.715 514.715 -

Bonds 5.95 230,342 421,700 596,775 984,846 - 2,233,663 6.03

Treasury bills 2.00 9,920 - - - - 9,920 2.00


240,262 421,700 596,775 984,846 - 2,243,583

Bonds 4.27 - 100,115 298,855 308,111 - 707,080 5.30

Commercial bills 5.75 3,620 - - - - 3,620 5.75

Shares - - - - - 305,751 305,751 -

Units in funds - - - - - 23,902 23,902 -


3,620 100,115 298,855 308,111 329,653 1,040,354

Bonds 6.21 - 31,552 - 53,928 - 85,480 6.33

Shares - - - - - 15,066 15,066 -

Units in funds - - - - - 185,261 185,261 -

Financial assets at fair value through P&L – for trading

- 31,552 - 53,928 200,327 285,807

Deposits in banks 3.89 782,510 338,552 326,615 - - 1,447,677 3.89

Loans 7.95 182,832 29,353 15,820 - - 228,005 7.95

Deposits, loans and receivables

965,342 367,905 342,434 - - 1,675,682 -

Total financial assets 1,209,224 921,272 1,238,064 1,346,884 1,466,067 6,181,511 -

Liabilities arising from direct insurance - 83,288 - - - - 83,288 - Other liabilities - 127,868 - - - - 127,868 -

Total financial and other liabilities (other than liabilities to non-controlling unitholders in investment funds)

211,155 - - - - 211,155

Interest rate risk gap 998,069 921,272 1,238,064 1,346,884 1,466,067 5,970,356


117

20. Reinsurance share in technical provisions

Company Company

Group Group

31 Dec. 2015

31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Unearned premiums 31,961 40,228

24,660 14,153

Provisions for reported but not settled claims 210,994 228,866

58,934 42,547

Mathematical provisions 270 319

270 319

Provisions for incurred, but not reported claims (IBNR) 63,544 70,003

79,810 87,834

306,769 339,416

163,674 144,852


118

21. Deferred tax assets

(i) Movements in deferred tax assets:

Company

in HRK '000

Impairment of investment in

subsidiaries and associates

Financial assets at fair value

through profit or loss

Impairment of available-for-sale financial assets

Impairment of held-to-maturity

investment

Impairment of loans and deposits

Fair valuation losses on

investment property

Tax losses carry-forward

TOTAL

At 1 January 2014 7,361 1,619 13,175 11,280 (1,348) 14,183 - 46,270

Utilised deferred tax assets - (124) (58) - (680) - - (862)

Deferred tax assets recognised in profit or loss

2,877 521 11,020 5,692 3,702 49,304 28,322 101,438

Deferred tax assets recognised in other comprehensive income

- - 727 - - - - 727

At 31 December 2014 10,238 2,016 24,864 16,972 1,674 63,487 28,322 147,573

Utilised deferred tax assets (1,580) (72) (3,040) (1,143) (1,726) (8,077) (9,741) (25,379) Deferred tax assets recognised in profit or

loss - 418 4,626 - 52 - 5,096

At 31 December 2015 8,658 2,362 26,450 15,829 - 55,410 18,581 127,290

(ii) Movements in deferred tax liabilities:

31 Dec. 2015 31 Dec. 2014


At 1 January 43,623 34,301

Utilization (284) 351

Change in fair value of financial assets available for sale (7,143) 25,431

Impairment of investment property 24 (15,760)

At 31 December 36,220 43,623

(iii) Netting of deferred tax: 31 Dec. 2015 31 Dec. 2014


Balance of deferred tax assets 127,290 147,573

Balance of deferred tax liabilities (36,220) (43,623)

Net deferred tax assets at 31 December 91,070 103,950

Deferred tax liability is recognized on the basis of fair value adjustment of financial assets available for sale, land and buildings used for business activities, and the part of land and buildings not used for business activities. In each accounting period it is reduced by 20% of the depreciation resulting from the revaluation of property for business activities.


119

21. Deferred tax assets (continued) (i) Movements in deferred tax assets:

Group in HRK '000

Financial assets at fair

value through profit or loss

Impairment of available-for-sale financial assets

Impairment of held-to-maturity

investment

Impairment of loans and

deposits

Fair valuation losses on

investment property

Tax losses for carry-forward

TOTAL

At 1 January 2014 10,987 15,471 11,280 9,231 14,888 2,487 64,343

Foreign exchange differences arising on translation of financial statements of foreign operations

- - - - - (86) (86)

Utilized deferred tax assets in profit or loss (8,496) (58) - (1,299) (382) (2,268) (12,503)

Deferred tax assets recognised in profit or loss 2,253 12,778 5,692 10,146 49,427 29,881 110,177

Deferred tax assets recognised in other comprehensive income - 727 - - - - 727

At 31 December 2014 4,744 28,918 16,972 18,078 63,933 30,013 162,658

Foreign exchange differences arising on translation of financial statements of foreign oerations

(3) - - - - - (3)

Utilized deferred tax assets in profit or loss (1,571) (3,038) (1,142) (2,049) (7,586) (10,746) (26,132)

Deferred tax assets recognised in profit or loss 5,367 626 - 123 (174) 35 5,977

Deferred tax assets recognised in other comprehensive income - - 96 - - - 96

At 31 December 2015 8,537 26,506 15,926 16,152 56,173 19,302 142,596


120

21. Deferred tax assets (continued)

(ii) Movements in deferred tax liabilities:

31 Dec. 2015 31 Dec. 2014


At 1 January 76,088 66,766

Utilization (5,028) 351

Change in fair value of investments available for sale (6,858) 24,731

Impairment of investment property recognized in profit or loss (2,879) -

Impairment of investment property

(15,760)

At 31 December 61,324 76,088

(iii) Netting of deferred tax:

31 Dec. 2015 31 Dec. 2014


Total deferred tax assets 142,596 162,658

Netting of deferred taxes (i) (37,469) (44,469)

Net movement in deferred tax assets 105,128 118,191

Total deferred tax liabilities 61,324 76,088

Netting of deferred taxes (i) (37,469) (44,469)

Net movement in deferred tax liabilities 23,855 31,619

(i) Netting of deferred taxes is recognized where it is possible to net future tax liability with receivables for tax on the level of each Group company.


121

22. Insurance contract and other receivables

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014

in HRK’000 in HRK’000


Receivables from policyholders, net 376,047 406,188

528,645 546,879

Receivables from reinsurance and coinsurance 25,842 6,206

23,762 29,955

Receivables from other insurance, net 244,413 180,197

248,412 184,996

Receivables for return on investment, net 8,376 7,966

14,040 14,108

Other receivables, net 67,994 78,054

97,378 108,206

722,672 678,611 912,237 884,144

Interest receivable not due 69,420 64,195

80,044 70,634

Prepaid expenses 7,055 11,162

9,414 14,045

Other assets 479 2,059 2,808 2,782

799,626 756,026

1,004,503 971,605

22.1. Receivables from policyholders

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015

31 Dec. 2014


Written but not invoiced premium

152,708 153,680

286,687 233,045

Invoiced uncollected premium 518,973 567,905

585,737 675,491

Receivables from policyholders, gross

671,681 721,585

872,424 908,536

Impairment (295,634) (315,397)

(343,779) (361,658)

Receivables from policyholders, net

376,047 406,188

528,645 546,879

22.2. Receivables from coinsurance and reinsurance business

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Receivables from reinsurance premium 46 1,444

- 1,444

Receivables from reinsurance claims 18,260 4,594

16,226 7,071

Receivables from coinsurance claims 7,536 168

7,536 21,436

25,842 6,206

23,762 29,955


122

22.3. Receivables from other insurance business

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Receivables for reimbursements 278,895 211,389

283,652 214,961

Impairment (46,592) (43,967)

(48,935) (45,760)

Net receivables 232,303 167,422

234,717 169,202

Receivables for foreign claims 11,696 13,313

12,674 14,919

Impairment (553) (538)

(553) (552)

Net receivables 11,143 12,776 12,121 14,367

Other receivables 967 - 1,574 1,754

Impairment - - - (328)

Net receivables 967 -

1,574 1,426

Receivables from other insurance, gross 291,558 224,702

297,900 231,635

Impairment (47,145) (44,505)

(49,488) (46,639)

Receivables from other insurance, net 244,413 180,197

248,412 184,996

22.4. Receivables for returns on investment

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Receivables for regular

interest on given loans 11,459 12,530

25,302 12,761

Receivables for regular interest on deposits

6,963 8,015

12,397 10,405

Receivables for default interest

3,450 1,807

3,727 1,807

Other interest receivables - -

- 3,636

Receivables for returns on investment, gross

21,872 22,353

41,426 28,610

Impairment (13,496) (14,387)

(27,386) (14,502)

Receivables for returns on investment, net

8,376 7,966

14,040 14,108


123

22.5. Other receivables

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015

31 Dec. 2014



Receivables for sold flats 6,019 13,147

6,143 13,147

Receivables for given advances 2,592 2,632

4,514 3,414

Receivables from buyers 4,091 7,280

17,969 18,105

Receivables from the state and state institutions

30,179 30,925

41,856 33,946

Receivables from credit card companies 18,879 20,353

20,225 21,255

Receivables obtained through cession 4,900 7,254

4,900 7,254

Receivables under court decisions 513 452

513 452

Receivables from employees 3,692 3,139

4,504 4,092

Receivables from agents 4,965 1,078

4,965 2,346

Other receivables 30,212 28,331

33,242 42,788

Other receivables, gross 106,042 114,590

138,831 146,798

Impairment (38,048) (36,536)

(41,453) (38,592)

Other receivables, net 67,994 78,054

97,378 108,206


124

22.6. Analysis of receivables from insurance business and other receivables by maturity:

Company Receivables from

policyholders

Receivables from coinsurance and

reinsurance business

Receivables from returns on

investment

Receivables from other insurance business Other

receivables TOTAL Recourse

receivables Receivables from

foreign claims Other

receivables


Neither past due nor impaired 152,602 - 317 161,806 - - 10,561 325,286

Past due but not impaired 253,586 6,206 7,649 5,615 12,776 - 67,493 353,325

Past due and impaired 315,397 - 14,387 43,967 538 - 36,536 410,825

Impaired (315,397) - (14,387) (43,967) (538) - (36,536) (410,825)

31 December 2014 406,188 6,206 7,966 167,422 12,776 - 78,054 678,611

Neither past due nor impaired 152,708 - 275 230,797 - - 14,595 398,375

Past due but not impaired 223,339 25,842 8,101 1,506 11,143 967 53,399 324,297

Past due and impaired 295,634 - 13,496 46,592 553 - 38,048 394,323

Impaired (295,634) - (13,496) (46,592) (553) - (38,048) (394,323)

31 December 2015 376,047 25,842 8,376 232,303 11,143 967 67,994 722,672


125

22.6. Analysis of receivables from insurance business and other receivables by maturity (continued)

Group Receivables from

policyholders




investment




foreign claims Other

receivables


31 December 2013 633,201 52,516 13,490 123,780 11,343 3,036 89,616 926,982

Neither past due nor impaired 266,313 - 6,288 162,824 - - 31,275 466,700

Past due but not impaired 280,565 29,955 7,820 6,377 14,367 1,426 76,932 417,442

Past due and impaired 315,397 - 14,502 45,760 552 328 38,592 415,131

Impaired (315,397) - (14,502) (45,760) (552) (328) (38,592) (415,131)

31 December 2014 546,879 29,955 14,108 169,201 14,367 1,426 108,207 884,144

Neither past due nor impaired 279,743 - 5,421 231,553 - 638 33,724 551,079

Past due but not impaired 248,902 23,762 8,619 3,164 12,121 936 63,654 361,158

Past due and impaired 343,779 1,536 27,386 48,935 553 - 41,453 463,642

Impaired (343,779) (1,536) (27,386) (48,935) (553) - (41,453) (463,642)

31 December 2015 528,645 23,762 14,040 234,717 12,121 1,574 97,378 912,237


126

22.7. Credit quality of receivables neither past due nor impaired:

Comapny

Receivables from

policyholders



Receivables from returns

on investment

Receivables from other insurance business

Other receivables TOTAL

Recourse receivables

Receivables from

foreign claims

Other receivables


High quality - - 317 - - - - 317

Standard quality 152,602 - - 161,806 - - 10,561 324,969

31 December 2014 152,602 - 317 161,806 - - 10,561 325,286

High quality - - 275 - - - - 275

Standard quality 152,708 - - 230,797 - - 14,595 398,100

31 December 2015 152,708 - 275 230,797 - - 14,595 398,375


127

22.7. Credit quality of receivables neither past due nor impaired (continued)

Group

Receivables from policyholders

Receivables from

coinsurance and



investment


Other receivables TOTAL

Recourse receivables

Receivables from foreign

claim Other

receivables


31 December 2013 300,796 33 4,035 119,463 - - 25,205 449,532

High quality - - 6,288 - - - - 6,288 Standard quality 266,313 - - 162,824 - - 31,275 460,412

31 December 2014 266,313 - 6,288 162,824 - - 31,275 466,700

High quality 4,371 - 5,085 - - 608 816 10,880

Standard quality 275,372 - 336 231,553 - 30 32,908 540,199

31 December 2015 279,743 - 5,421 231,553 - 638 33,724 551,079


128

22.8. Analysis of receivables that are past due but not impaired by the number of days up to maturity

Company Group

<90 days 90-180 days > 180 days Total <90 days 90-180 days > 180 days Total


Receivables from insurance business 176,914 69,930 6,742 253,586 197,340 75,774 7,451 280,565

Receivables from coinsurance and reinsurance business

6,206 - - 6,206 23,229 6,726 - 29,955

Receivables from returns on investment

7,376 274 - 7,649 7,546 274 - 7,820

Receivables from other insurance business:

15,850 2,541 - 18,391 19,069 2,902 200 22,171

recourse receivables 3,075 2,541 - 5,615 3,276 2,902 200 6,378

receivables from foreign claims

12,776 - - 12,776 14,367 - - 14,367

other receivables - - - - 1,426 - - 1,426

Other receivables 65,231 1,910 352 67,493 73,955 2,358 619 76,932

31 December 2014 271,578 74,654 7,094 353,325 321,139 88,034 8,270 417,443

Receivables from insurance business 160,912 57,616 4,811 223,339 182,645 61,219 5,038 248,902

Receivables from coinsurance and reinsurance business

25,842 - - 25,842 20,478 3,050 234 23,762


6,511 78 1,512 8,101 6,739 368 1,512 8,619

Receivables from other insurance business:

12,695 921 -

13,616 14,787 1,043 382 16,212

recourse receivables 585 921 - 1,506 1,742 1,043 379 3,164

receivables from foreign claims

11,143 - -

11,143 12,119 - 2 12,121

other receivables 967 - - 967 936 - - 936

Other receivables 37,546 15,853 - 53,399 42,275 14,594 6,785 63,654

31 December 2015 243,506 74,468 6,323 324,297 266,934 80,274 13,950 361,158


129

22.9. Movements in impairment of receivables

Group Receivables from

insurance business







foreign claims

Other receivables


31 December 2013 320,725 - 47,507 36,844 555 243 32,250 438,124

Increase in impairment 233,811 - 4,189 14,245 992 122 7,425 260,784

Collection of previously impaired amounts (189,120) - (8,096) (4,591) (995) (37) (1,045) (203,883)

Write-offs (50,019) - (29,098) (739) - - (38) (79,893)

31 December 2014 315,397 - 14,502 45,760 552 328 38,592 415,130

Increase in impairment 240,590 1,536 16,254 11,606 326 - 3,009 273,321

Collection of previously impaired amounts (183,615) - (3,370) (7,935) (325) (328) (148) (195,721)

Write-offs (28,397) - - (483) - - - (28,880)

Foreign exchange differences (196) - - (12) - - - (208)

31 December 2015 343,779 1,536 27,386 48,935 553 - 41,453 463,642

Company Receivables from

insurance business





Other receivables

TOTAL Recourse receivables

Receivables from foreign

claims

Other receivables


31 December 2013 320,725 - 33,526 35,043 516 - 31,298 421,108

Increase in impairment 202,193 - 4,080 13,965 970 - 5,238 226,446

Collection of previously impaired amounts (167,264) - (339) (4,302) (948) - - (172,853)

Write-offs (40,258) - (22,880) (739) - - - (63,877)

31 December 2014 315,396 - 14,387 43,967 538 - 36,536 410,825

Increase in impairment 178,657 - 209 7,015 902 - 1,735 188,517

Collection of previously impaired amounts (169,874) - (1,099) (3,907) (884) - (222) (175,986)

Write-offs (28,546) - - (483) (3) - - (29,032)

31 December 2015 295,634 - 13,496 46,591 553 - 38,048 394,322


130

23. Cash and cash equivalents

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Cash in bank accounts 25,267 55,636

61,519 88,007

Cash in foreign currency accounts 33,057 45,494

63,912 66,920

Cash on hand 36 45

3,045 752

Deposits with maturity up to three months - -

7,680 9,699

Total cash and cash equivalents 58,360 101,175

136,156 165,378

24. Equity

24.1. Share capital

The Company’s share capital amounts to the nominal value of HRK 601,576 thousand (31 December 2014: HRK 601,576 thousand) and comprises 429,697 shares with the par value of HRK 1,400, which have been paid entirely in cash, registered at the register of the Commercial Court in Zagreb. The shares are marked as follows

- 307,598 are ordinary shares with ticker CROS-R-A; - 113,349 are ordinary shares of the 2nd issue with ticker CROS-R-A; - 8,750 are preference shares with ticker CROS-P-A.

Preference shares provide their holders with the following rights:

- voting rights equal to the holders of ordinary shares;

- dividend payment in the amount of 8% annually on the nominal value of shares, for the year in

which an appropriate profit was realised;

- cumulative dividend payment is guaranteed provided that the Company’s result enables the

payment;

- cumulative dividend payment if the Company’s result enables the payment of a higher dividend to

all shareholders than the dividend from the previous point, as well as for the years when the

liability cannot be settled due to insufficient profit.


131

The ownership structure as at 31 December 2014 and 31 December 2013 was as follows:

31 Dec. 2015 31 Dec. 2014

Shareholder

Number of shares

Nominal amount in HRK’000

Equity share %

Number of shares

Nominal amount in HRK’000

Equity share %

ADRIS grupa d.d. 263,419 368,787 61.3 263,419 368,787 61.3

DUUDI/RH 120,442 168,619 28.0 120,442 168,619 28.0

DUUDI/ State Agency for Deposit Insurance

11,145 15,603 2.6 11,145 15,603 2.6

Raiffeisenbank Austria d.d.- custody account

19,491 27,287 4.5 19,503 27,304 4.5

Other shareholders 15,200 21,280 3.5 15,188 21,263 3.5

429,697 601,576 100 429,697 601,576 100

On 18 December 2013 the Government of the Republic of Croatia adopted the Decision on the selection of

Adris grupa d.d. as the best investor for the purchase of a portion of the equity share of the Republic of Croatia

and capital contribution in CROATIA osiguranje d.d. Zagreb. Consequently, on 6 March 2014, the Republic of

Croatia and Adris grupa d.d., Rovinj concluded an Agreement on the purchase and sale of shares in the

company CROATIA osiguranje d.d., Zagreb which foresees the sale of 38.6% of shares of Croatia osiguranje d.d.,

and the Shareholder Agreement that regulates the relations between the Republic of Croatia and Adris grupa

d.d. as the shareholder of Croatia osiguranje d.d.

Both Agreements became effective as of 22 April 2014 when the 39th General Assembly meeting of CROATIA

osiguranje d.d. was held, where the decision was made to increase share capital by cash contributions by

issuing 113,349 new ordinary shares in the amount of HRK 7,412.25 per share, or a total of HRK 840.17 million,

which was fully paid by Adris. As per the General Assembly decision, the increased share capital of the

Company amounts to HRK 601.57 million and is divided among 420,947 ordinary shares and 8,750 preference

shares.

As of 22 April 2014 Adris grupa d.d. is the majority shareholder of Croatia osiguranje d.d.

In mid May 2014 Adris grupa d.d. issued a bid to take over the remaining shares of Croatia osiguranje d.d. at

HRK 7,412.25 per share. It participated in the bid jointly with the Republic of Croatia and companies in the

majority ownership of Adris grupa d.d. – Istragrafika, Hrvatski duhani and Maistra. The takeover bid was

accepted by 673 shareholders and 26,815 ordinary and 1,115 preference shares were taken over. As a result, as

of 1 July 2014 Adris Grupa holds a total of 169,440 shares of Croatia osiguranje, or a 53.56% share in the share

capital. The Republic of Croatia holds a total of 120,442 shares or 38.07% share in the share capital.

Based on the decision of the 39th General Assembly meeting of Croatia osiguranje d.d. on the increase in the

Company’s share capital, and in accordance with the provisions of the Agreement on the purchase and sale of

shares in the company CROATIA osiguranje d.d., Zagreb signed on 6 March 2014 between the Government of

the Republic of Croatia and Adris grupa, on 15 September 2014 Adris grupa paid HRK 840,171,125.20 as a

capital contribution to Croatia osiguranje. The share capital increase was recorded in the court register of the

Commercial Court in Zagreb on 15 September 2014. After the capital contribution, the share of the majority

shareholder, ADRIS grupa d.d., owned by the Company was increased from 53.56% to 65.81%. The total

majority shareholder percentage as at 31 December 2015 consists of the own share of 61.3% increased by

another custodian account owned by the majority shareholder of 4.8%.


132

24.2. Reserves

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Legal reserves 23,576 23,576

23,576 23,788

Statutory reserves 147,220 147,220

147,220 147,220

Other reserves 224,739 342,211

224,739 343,738

395,535 513,007

395,535 514,746

Pursuant to the Companies Act, 5% of profit for the year is allocated to the legal reserve until it reaches 5% of the share capital.

Statutory reserves and other reserves were established by the distributing profits from previous years.


133

24.3. Fair value reserve

Fair value reserve is presented as follows:

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Business property 78,488 79,790

148,865 174,156

Deferred tax from change in fair value reserve of business property (15,698) (15,958)

(28,425) (34,831)

Available-for-sale financial assets 98,975 134,688

104,569 140,320

Deferred tax from change in fair value reserve of available-for-sale financial assets (19,795) (26,939)

(19,828) (26,870)

Foreign exchange differences arising on translation of financial statements of foreign operations - - (5,724) (5,972)

141,970 171,581 199,457 246,803

/i/ Fair value reserve of business property

Company Group


1 January 2014 127,566 215,066

Decrease in fair value reserve (61,274) (70,828)

Release of fair value reserve, realised portion (2,460) (4,914)

31 December 2014 63,832 139,324

Increase in fair value reserve 215 176

Decrease in fair value reserve (119) (119)

Release of fair value reserve, realized portion (depreciation) (1,138) (18,941)

31 December 2015 62,790 120,440

/ii/ Revaluation reserves of available-for-sale financial assets

Company Group


1 January 2014 9,273 591

Change in fair value of available-for-sale financial assets 43,440 49,021

Impairment of financial assets 55,099 57,929

Realized losses from available-for-sale financial assets (63) (63)

31 December 2014 107,749 107,478

Change in fair value of available-for-sale financial assets (60,890) (60,780)

Impairment of financial assets, net of tax (Note 12.1) 37,007 36,739

Realized losses from available-for-sale financial assets, net of tax (through profit)

(4,686) (4,420)

31 December 2015 79,180 79,017


134

25. Technical provisions

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Claims provisions, gross Provisions for reported but not settled

claims 1,581,331 1,597,603 1,701,617 1,777,164 Provisions for incurred, but not reported

claims (IBNR) 967,304 974,887 1,161,849 1,088,298 Provisions for costs of claims handlings 123,334 128,624 149,645 152,180

Claims provisions, gross 2,671,969 2,701,114 3,013,111 3,017,642

Unearned premiums, gross 790,773 812,835

1,069,174 1,066,292

Mathematical provisions for insurance, gross 2,266,361 2,071,854

2,507,339 2,277,669

Other insurance-technical provisions, gross 72,221 96,726

91,936 123,534

Technical provisions for life insurance where the policyholder bears the investment risk 34,582 5,312

34,582 5,312

Total technical provisions 5,835,906 5,687,841

6,716,142 6,490,448

Other insurance-technical provisions include unexpired risk reserves.

25.1. Movements in reported but not settled claims, gross

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



LIFE

Balance at 1 January 21,956 21,839

22,523 22,061

Foreign exchange differences arising on translation of financial statements of foreign operations - - (2)

-

Claims incurred in the current year 9,156 11,762

10,858 12,008

Transfer from provisions for incurred, but not reported claims 237 522

366 567

Change in claims from the previous year 3,344 (3,049)

3,083 (2,976)

Settled claims (10,405) (9,117)

(11,834) (9,136)

Balance at 31 December 24,288 21,956 24,994 22,523

NON-LIFE

Balance at 1 January 1,575,647 1,552,265

1,754,641 1,702,316 Foreign exchange differences arising on translation of financial statements of foreign operations - (372) (198)

Claims incurred in the current year 286,071 319,169

335,750 220,827 Transfer from provisions for incurred, but not reported claims 117,740 117,838

124,678 104,707

Change in claims from the previous year (55,049) 1,617

(26,039) 1,801

Settled claims (367,366) (415,241)

(512,035) (274,813)

Balance at 31 December 1,557,043 1,575,647 1,676,623 1,754,641

TOTAL LIFE AND NON LIFE Balance at 31 December 1,581,331 1,597,603 1,701,617 1,777,164


135

25.2. Movements in incurred but not reported claims

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014

LIFE in HRK '000 in HRK '000



5,001 4,745

Foreign exchange differences arising on translation of financial statements of foreign operations - -

(1) 2

Increases recognized during the year 1,176 1,797

1,448 2,376

Transfer to provisions for reported claims (237) (522)

(366) (567)

Settled claims (939) (1,275)

(1,062) (1,555)


NON-LIFE

Balance at 1 January 970,476 1,010,391

1,083,298 1,127,204 Foreign exchange differences arising on translation of financial statements of foreign operations - - (539) (1,708)

Increases recognized during the year 239,299 227,736

367,870 259,260

Transfer to provisions for reported claims (117,740) (117,838)

(134,260) (125,048)

Settled claims (129,141) (149,813)

(159,540) (176,411)

Balance at 31 December 962,894 970,476 1,156,829 1,083,297

TOTAL LIFE AND NON LIFE Balance at 31 December 967,304 974,887 1,161,849 1,088,298

25.3. Movements in provisions for unearned premiums


31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014

LIFE in HRK '000 in HRK '000 in HRK '000 in HRK '000

Balance at 1 January 2,607 2,753 3,507 3,587


(5) 9

Written premiums during the year 513,508 366,589 513,760 439,979

Earned premiums during the year (512,393) (366,734) (512,463) (440,068)


NON-LIFE

Balance at 1 January 810,228 932,736 1,062,785 1,142,164


(839) (2,492)

Written premiums during the year 1,794,422 1,913,317 2,197,746 2,429,287

Earned premiums during the year (1,817,599) (2,035,825) (2,195,317) (2,506,175)

Balance at 31 December 787,051 810,228 1,064,375 1,062,785

TOTAL LIFE AND NON LIFE Balance at 31 December 790,773 812,835 1,069,174 1,066,292


136

25.4. Movements in mathematical provisions for insurance, gross

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



At 1 January 2,071,854 1,955,270

2,277,669 2,131,297 Foreign exchange differences arising on translation of financial statements of foreign operations - - (724) 1,126

Allocated premium 374,624 303,541

435,037 332,112 Reversal of liabilities due to benefits paid, surrenders and other terminations (263,036) (257,669)

(288,116) (257,669)

Capitalised technical interest 76,077 72,506

76,077 72,506

Change of discretionary bonus 6,842 (1,795)

7,396 (1,703)

At 31 December 2,266,361 2,071,854 2,507,339 2,277,669

25.5. Movements in technical provisions for life insurance where the policyholder bears the investment risk, gross

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



LIFE


5,312 8,389

Allocated premium 32,029 62

32,029 62

Reversal of liabilities due to benefits paid, surrenders and other terminations (1,937) (5,072)

(1,937) (5,072)

Unrealised (losses)/gains on assets in which the policyholders’ funds are invested (822) 1,933

(822) 1,933



137

25.6. Analysis of movements in claims provisions (RBNS and IBNR) for non-life insurance

Company

in HRK '000

Before 2009

2009 2010 2011 2012 2013 2014 2015 TOTAL

Assessment of cumulative claims at the end of the year of the accident - 1,884,850 1,640,995 1,664,547 1,508,800 1,406,818 1,244,991 1,192,854 -

One year later - 1,778,879 1,558,308 1,552,097 1,421,351 1,351,615 1,216,132 - -

Two years later - 1,749,788 1,528,681 1,525,994 1,406,404 1,338,872 - - -

Three years later - 1,738,681 1,499,108 1,516,011 1,417,595 - - - -

Four years later - 1,755,962 1,506,298 1,534,264 - - - - -

Five years later - 1,745,577 1,515,093 - - - - - -

Six years later - 1,751,012 - - - - - - -

Assessment of cumulative claims - 1,751,012 1,515,093 1,534,264 1,417,595 1,338,872 1,216,132 1,192,854 9,965,822

Cumulative payments - 1,637,016 1,394,745 1,406,400 1,253,168 1,179,954 1,013,418 656,372 8,541,073

Provision for previous years 1,095,186 - - - - - - - 1,095,186

Costs of claims handling 48,879 5,604 5,922 6,380 8,084 8,492 10,997 27,541 121,899

Value recognized in the statement of financial position 1,144,065 119,600 126,269 134,244 172,511 167,410 213,712 564,023 2,641,835


138

25.7. Maturity of gross technical provisions

Company in HRK '000

Less than 1 year

Between 1 and 5 years


More than 10 years Total

2015

Unearned premiums, gross 620,823 112,592 44,555 12,803 790,773

Mathematical provisions for insurance, gross 237,197 1,048,699 526,596 453,869 2,266,361

Claims provisions, gross 738,454 797,964 420,003 715,548 2,671,969

Other insurance-technical provisions, gross 57,399 11,096 1,963 1,763 72,221

Technical provisions for life insurance where the policyholder bears the investment risk 4 1,436 33,039 103 34,582

1,653,877 1,971,787 1,026,156 1,184,086 5,835,906

2014 Unearned premiums, gross 656,081 107,730 37,897 11,127 812,835

Mathematical provisions for insurance, gross 178,507 919,118 523,296 450,934 2,071,854



Technical provisions for life insurance where the policyholder bears the investment risk 3,769 1,288 79 176 5,312

1,760,370 1,864,124 1,075,160 988,188 5,687,841

Group in HRK '000

Less than 1 year



More than 10 years Total

2015

Unearned premiums, gross 890,739 103,307 66,319 8,809 1,069,174

Mathematical provisions for insurance, gross 253,948 1,132,079 592,746 528,566 2,507,339



Technical provisions for life insurance where the policyholder bears the investment risk 4 1,436 33,039 103 34,582

2,110,747 2,193,244 1,146,351 1,265,800 6,716,142

2014 Unearned premiums, gross 848,224 144,386 62,707 10,975 1,066,292

Mathematical provisions for insurance, gross 212,044 913,217 596,154 556,253 2,277,669

Claims provisions, gross 1,186,895 830,680 527,519 472,548 3,017,642


Technical provisions for life insurance where the policyholder bears the investment risk 3,769 1,288 79 176 5,312

2,348,187 1,900,172 1,189,154 1,052,935 6,490,448


139

25.8. Analysis of claim (loss) ratios, cost ratios and combined ratios for the Company:

Types of non-life insurance Claims ratio Cost ratio Combined

ratio Claims

ratio Cost ratio

Combined ratio

2015 2015 2015 2014 2014 2014

Accident insurance 28.12% 39.95% 68.07% 30.91% 50.14% 81.05%

Health insurance 116.63% 43.50% 160.13% 165.28% 69.16% 234.44%

Road vehicle insurance 87.95% 35.98% 123.93% 100.13% 48.94% 149.07%

Railroad rolling stock insurance 6.46% 42.03% 48.49% 7.83% 51.07% 58.90%

Aircraft insurance 150.73% 33.18% 183.91% 95.65% 25.39% 121.05%

Vessel insurance 62.89% 23.80% 86.69% 37.20% 38.81% 76.01%

Insurance for goods in transit 52.76% 39.08% 91.83% 27.07% 35.16% 62.24% Insurance against fire and natural disaster 22.11% 32.28% 54.40% 45.00% 46.10% 91.10% Other types of property insurance 67.40% 36.18% 103.58% 74.63% 53.12% 127.75%

Motor liability insurance 52.73% 40.44% 93.17% 38.81% 58.37% 97.18%

Aircraft liability insurance 54.88% 32.79% 87.67% 6.72% 26.65% 33.37%

Boat liability insurance 36.64% 26.39% 63.04% 79.88% 31.25% 111.13%

Other liability insurance 90.15% 27.04% 117.18% 94.89% 40.33% 135.22%

Loan insurance/credit insurance 45.90% 72.51% 118.41% 83.51% 32.39% 115.91%

Surety insurance 112.16% 27.05% 139.21% 72.15% 23.58% 95.72% Miscellaneous financial loss insurance 21.49% 35.30% 56.79% 26.43% 33.40% 59.82%

Travel insurance 33.74% 44.16% 77.90% 24.54% 65.06% 89.60%

Total non-life insurance 56.95% 37.22% 94.18% 56.65% 49.56% 106.21%

The above ratios are calculated in accordance with the Ordinance on the structure and contents of financial statements of insurance and reinsurance companies (Official Gazette No. 132/10, 39/2012) adopted by the Croatian Financial Services Supervisory Agency.

Claims ratio, cost ratio and combined ratio by types of non-life insurance are calculated in the following way:

Claims ratio = (settled claims, gross + change in claims provisions, gross) / (gross written premium + change in

gross provisions for unearned premiums).

Cost ratio = (administration costs - income from commissions and fees +acquisition costs - change in deferred

acquisition costs) / gross written premium.

Combined ratio = claims ratio + cost ratio.


140

25.9. Analysis of assets covering mathematical provisions with insurance contract liabilities for the Company:

Type of financial instrument 31 Dec. 2015 31 Dec. 2014


Assets for mathematical provisions coverage Securities issued by the Republic of Croatia and Croatian Bank for

Reconstruction and Development 1,977,660 1,695,182

Bonds and other debt securities issued by a local and regional self-government unit in the Republic of Croatia

2,174 4,353

Bonds and other debt securities traded in the regulated securities market in the Republic of Croatia

10,000 32,574

Shares traded in the regulated securities market in the Republic of Croatia

2,556 10,858

Units and shares in investment funds registered in the Republic of Croatia

13,007 36,090

Advances and loans in the amount of total surrender value under life insurance contract

47,391 42,801

Deposits in banks with registered office in Republic of Croatia 256,565 285,568

Assets in the insurance company's business account 26,869 30,376

Total assets for mathematical provisions coverage 2,336,222 2,137,803

Mathematical provisions, net of reinsurance 2,266,092 2,071,535


23,595 20,876

Required mathematical provision coverage 2,289,687 2,092,411

Coverage excess 46,535 45,392

Movements in annual return on mathematical provision

Pursuant to the Ordinance on minimum standards, methods of calculating and guidelines for calculating technical provisions in insurance (Official Gazette No. 97/09, 135/09, 150/09), the maximum interest rate for the calculation of mathematical provision is 3.3% for insurance contracts concluded before 2010, 3% for insurance contracts concluded during 2010, and 2.50% or 2.25% for insurance contracts concluded after 2010 where the interest rate shall not be higher than the average return that the Company realized through investment of mathematical provision in the last three years.

The average return is calculated as a weighted average return from the mathematical provision in the last three years, where the weights represent the average value of mathematical provision during the year.

The average return is calculated as the sum of returns multiplied by the average value of the mathematical provision for the last three full financial years (in annaual financial statements, including the year for which mathematical provision is calculated) and then divided by the sum of the average values of the mathematical provision.

The following table shows movements in the annual return realized from investment of assets covering mathematical provisions for 2015, 2014 and 2013:

2013 2014 2015

in HRK '000HRK

in HRK '000HRK

in HRK '000HRK

Average balance of mathematical provisions 1,937,766 2,013,562 2,169,108

Return on investment from mathematical provisions 115,298 117,140 100,904

Rate of annual return on mathematical provisions 5.95% 5.82% 4.65%

Average return on mathematical provisions for the past 3 years 5.91% 5.94% 5.45%


141

25.10. Analysis of assets covering technical provisions, except formathematical provisions with insurance contract liabilities for the Company:

Type of financial instrument 31 Dec. 2015 31 Dec. 2014


Securities issued by the Republic of Croatia 1,372,162 1,219,599

Securities issued by the Croatian Bank for Reconstruction and Development 11,413 11,444

Bonds and other debt securities traded in the regulated securities market in the Republic of Croatia 66,387 63,070

Shares traded in the regulated securities market in the Republic of Croatia 90,740 70,620

Shares issued by a foreign joint stock company which are traded in regulated capital markets of Member States or OECD members 161,848 199,393

Units and shares in investment funds which are registered in the Republic of Croatia 26,614 101,948

Loans collateralized with lien on real estate or transfer of right of ownership 137,158 172,005

Deposits in banks with registered office in the Republic of Croatia 570,000 785,891 Loans collateralized with bank guarantee issued by a bank with registered office in

the Republic of Croatia -

Ownership of real estate and other property rights over real estate 389,924 419,614

Assets in insurance company's business account 23,402 63,874

Investments with the consent of the supervisory body 357,038 375,782

Total assets for technical provisions coverage 3,206,688 3,483,240

Provisions for unearned premiums, net of reinsurance 758,812 772,608

Claims provisions, net of reinsurance 2,373,835 2,381,369

Other technical provisions for insurance 72,221 96,726

Required coverage of technical provisions, except for mathematical provisions 3,204,868 3,250,703

Coverage excess/shortage 1,820 232,537

As at 31 December 2015, the assets covering technical provisions amounted to 100.06% of the required technical provision coverage (as at 31 December 2014, assets covering technical provisions amounted to 107.15 % of the required technical provision coverage) so the Company met the requirements of the supervisory body regarding the level of technical provisions.


142

26. Provisions

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Provisions for termination benefits 43,418 146,459

49,900 150,453 Provisions for jubilee awards and termination

benefits (retirement) /i/ 31,261 68,330

42,808 74,126 Provisions for court claims 32,431 29,908

35,780 32,049

Other long-term provisions 400 3,794

400 4,505

107,510 248,491

128,888 261,133

Movements in provisions for jubilee awards, pensions, court claims and other long-term provisions are shown in the table below:

Company

Other long-term

provisions Provisions for

court claims

Provisions for jubilee awards

and termination benefits

(retirement)

Provisions for

termination benefits Total


Balance at 1 January 2014 - 20,838 82,186 10,214 113,238

Additional provisions 3,794 16,285 12,829 138,966 171,874

Decrease in provisions (utilization) - - (26,685) (2,721) (29,406)

Decrease in provisions (reversal) - (7,215) - (7,215)

Balance at 31 December 2014 3,794 29,908 68,330 146,459 248,491

Additional provisions - 18,717 - 17,720 36,437


Decrease in provisions (reversal) (3,394) (16,194) (34,416) - (54,004)

Balance at 31 December 2015 400 32,431 31,261 43,418 107,510

Group

Other long-term

provisions

Provisions for court

claims

Provisions for jubilee awards

and termination

benefits (retirement)

Provisions for termination

benefits Total in HRK '000 in HRK '000 in HRK '000 in HRK '000 in HRK '000

Balance at 1 January 2014 476 22,649 88,109 11,921 123,155

Additional provisions 4,505 17,317 14,160 141,253 177,235


Decrease in provisions (reversal) (476) (7,917) (1,458) - (9,851)

Balance a 31 December 2014 4,505 32,049 74,126 150,453 261,133

Additional provisions - 20,004 8,278 23,467 51,749


Decrease in provisions (reversal) (4,105) (16,273) (35,839) - (56,217)

Balance at 31 December 2015 400 35,780 42,808 49,900 128,888

/i/ The following assumptions were used for the calculation:

Employment termination rate is 5.34% (2014: 5.34%);

Increase in salaries is not expected;

The present value of the obligation was determined using a discount rate of 2.99% (2014: 3.45%).


143

27. Financial liabilities

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Financial liabilities with financial institutions - -

536 30,002

Other financial liabilities - -

1,193 1,525

- -

1,729 31,527

27.1. Liabilities to banks and other financial institutions

Nominal Year of 31 Dec. 2015 31 Dec. 2014

Currency rate % maturity in HRK’000 in HRK’000

Domestic bank EUR 4.30% 2016 536 1,862

Domestic bank HRK 3M ZIBOR + 3.38% 2024 - 28,140

536 30,002

27.2. Maturity of long-term liabilities


31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014


2014 - - - -

2015 - - - 3,671

2016 - - 536 3,201

2017 - - - 2,673

2018 - - - 2,792

2019 and thereafter - - - 17,665

- - 536 30,002


144

28. Insurance contract and other liabilities and deferred income


31 Dec.

2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Insurance contract liabilities 114,691 83,288

134,688 103,476

Reinsurance liabilities 40,547 8,958

42,431 40,496

Other liabilities 71,721 109,111

112,828 146,878 Accrued expenses 70,219 57,378

80,933 62,832

Deferred income 240,059 169,830

240,837 170,116

537,237 428,566

611,717 523,798

/i/ Insurance contract liabilities

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Liabilities for claims and contracted insurance amounts 46,713 37,257

55,487 51,650

Liabilities for contribution to the Fire Department 495 1,017

933 1,019

Liabilities for the guarantee fund 38,134 34,974

39,810 34,986 Liabilities for advances received for the insurance premium 27,032 8,438 30,197 8,438

Liabilities to the Croatian Insurance Bureau 85 30

85 30 Fee payable to the Croatian Financial Services Supervisory Agency 101 201

149 206

Liabilities for health insurance under motor liability premium 777 910

1,360 910

Other liabilities 1,354 460

6,666 6,237

114,691 83,288

134,688 103,476

/ii/ Liabilities from coinsurance and reinsurance

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Reinsurance premiums payable 39,578 8,958

39,939 39,940

Coinsurance premiums payable 969 -

2,492 557

40,547 8,958

42,431 40,496


145

/iii/ Other liabilities

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014 in HRK '000 in HRK '000


Trade payables 24,958 44,638

35,074 52,872

Advances received 1,880 617

6,179 1,259

Liabilities for net salaries 20,009 22,898

26,556 28,196

Liabilities for contributions from salaries 5,335 6,561

6,467 8,263

Liabilities for tax and surtax from salaries 3,537 4,524

4,387 5,351

Liabilities for contributions on salaries 4,691 5,828

5,838 6,956

Deductions from salaries and wages 114 1,640

162 1,679

Dividend payable 269 273

290 273

Liabilities to the state for sold flats 3,131 3,742

3,193 3,745

Due to employees 237 168

842 707

Liabilities for tax on motor liability and motor hull insurance 6,931 6,842

7,559 6,842

Other liabilities 629 11,380

16,281 30,735

71,721 109,111

112,828 146,878

/iv/ Accrued expenses and deferred income

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Accrued expenses for unused vacation days 24,096 24,465

24,657 25,250

Other accrued expenses 46,123 32,913

56,276 37,582

Total accrued expenses 70,219 57,378

80,933 62,832

Deferred income from recourses /i/ 234,885 165,894

234,885 165,894 Other deferred income 5,174 3,936

5,952 4,222

Total deferred income 240,059 169,830

240,837 170,116

310,278 227,208

321,770 232,948

/i/ Deferred income from recourse, due to uncertainty of collection, in the amount of HRK 234,885 thousand (31 December 2014: HRK 165,894 thousand) relates to deferred income from recouses which are either open or subject to a final settlement for payment (see Note 22). When the refusal of payment leads to these recourse receivables being sued, then the recourse receivable and deferred income are transferred to off-balance-sheet records.


146

29. Off-balance-sheet items

Company


31 Dec. 2015 31 Dec. 2014 31 Dec. 2015 31 Dec. 2014


Premium receivables from companies in bankruptcy 170,110 162,905

183,967 162,905

Shares and stakes of companies in bankruptcy 22,619 22,577 28,793 26,913 Placements and interest from companies in bankruptcy 48,543 49,551

75,228 83,873

Default interest on placements 42,992 31,905 44,195 32,863

284,264 266,918 332,183 306,554

Recourse receivables not recognised 859,187 910,587 880,568 938,588

1,143,451 1,177,775

1,212,751 1,245,142

30. Transactions with related parties

The Company believes that it has a direct related party relationship with the majority owner ADRIS grupa d.d. and the Republic of Croatia - and with largely state-owned companies, companies under control, under joint control or under significant influence of the key management and their close family members in accordance with the definitions contained in International Accounting Standard 24 "Related Party Disclosures" (IAS 24). The Group considers the members of the Management Board and Supervisory Board, directors of departments and directors of branch offices as key management. Key transactions with related parties

The Company ceded premium to reinsurance to the company Croatia Lloyd d.d. of HRK 19,762 thousand (2014: HRK 283,083 thousand) and recovered HRK 71,990 of claims (2014: HRK 148,061 thousand).

The Company has provided two loans to the subsidiary Croatia-Tehnički pregledi d.o.o. with a total value of HRK 60 million with an interest rate of 7% for the purpose of additional investment.

The Company pays income tax to the Republic of Croatia which is disclosed in Note 13. The Company is also paying salary taxes, which is disclosed in Note 9 and 10.2. There are no due unpaid liabilities to the Republic of Croatia in terms of taxes. Other relations with subsidiaries, joint ventures and associates within the Group and other companies that have a significant impact on the Company’s financial statements, and companies with majority state ownership are shown in the following tables for the years 2015 and 2014:


147

Transactions and balances with the parent company and other related entities of the Company and the Group for 2015:

2015 in HRK '000 Loans and

receivables


technical provisions

Receivables from

insurance business

Other receivables

Liabilities from

insurance business

Other liabilities

Written premiums

Premiums ceded to

reinsurance

Investment

income Other

income Incurred

claims


claims Operating expenses

Company Subsidiaries 51,627 226,642 13,522 8,577 1,632 704 31,469 19,762 15,619 20,641 6,186 71,990 15,083

Group Adris grupa d.d. – parent company - - 156 15 - 84 399 - - 44 14 - 102

Other Adris Group companies - - 1,453 - 72 259 24,098 - - 5,624 15,680 - 3,446

Transactions and balances with parties related to the shareholder with significant influence on the Group (Republic of Croatia) for 2015:

2015 in HRK '000

Debt securities Loans and

receivables

Receivables from

insurance business

Other receivables

Liabilities from

insurance business

Other liabilities

Income from

insurance

Interest

income Other

income

Expenses from

insurance Other

expenses

State and all companies in which the state has majority ownership 3,402,942 186,200 13,393 51 1,832

1,599 96,951 164,777 12 35,181 18,083


148

Transactions and balances with subsidiaries of the Company for 2014:

2014 in HRK '000 Loans and

receivables


technical provisions

Receivables from

insurance business

Other receivables

Liabilities from

insurance business

Other liabilities

Written premiums

Premiums ceded to

reinsurance

Investment

income Other

income Incurred

claims


claims Operating expenses

Company Subsidiaries 10,504 339,097 5,126 5,249 56,672 699 42,254 283,083 41,453 20,102 2,192 148,061 6,033

Group Adris grupa d.d. – parent company - - - - - 295 358 - - - 608 - 691

Other Adris Group companies - - 1,591 - 129 8 26,208 - - - 9,447 - 186

Transactions and balances with parties related to the shareholder with significant influence on the Group (Republic of Croatia) for 2014:

2014 in HRK '000

Debt securities


Receivables from

insurance business

Other receivables

Liabilities from

insurance business

Income from insurance

Interest income Other income

Expenses from

insurance Other

expenses

State and all companies in which the state has majority ownership 2,975,811 33,932 11,680 120 70 100,886 144,805 347 61,098 22,947


149

/i/ Key management compensation

Company Company

Group Group

31 Dec. 2015 31 Dec. 2014

31 Dec. 2015 31 Dec. 2014



Key management compensation 29,445 21,488

39,305 33,267

The key management personnel of the Group are members of the Management Board and Supervisory Board, directors of departments and directors of subsidiaries of the Company.

Key management compensation includes gross salary, life insurance premiums, benefits in kind, bonuses, termination benefits and compensation of the Supervisory Board.

31. Contingent liabilities

The Group has contingent liabilities in terms of issued collection instruments in the course of its business operations. It is unlikely that significant obligations could result from the above.

On account of its main activity, the Group is subject to court procedures initiated by injured parties. Provisions for court claims arising from claims incurred were provided for within claims provisions. The Management Board believes that these provisions are sufficient. 32. Commitments

As at 31 December 2015, the Company's contractual liabilities for future investments amount to HRK 9,184 thousand based on binding bids for investments in venture capital funds (31 December 2014: HRK 12,870 thousand).

33. Financial statements audit

Auditors of financial statements of the Group have provided services in 2015 in the amount of HRK 1.9 million plus value added tax (2014: HRK 3.7 million plus value added tax). The Company was provided services in the amount of HRK 775 thousand plus value added tax (2014: HRK 2.7 million plus value added tax). Services in 2015 and 2014 relate to the costs of statutory audit of annual financial statements and related audit services.

CROATIA osiguranje d.d., Zagreb Supplementary statements prescribed by the Ordinance of the Croatian Financial Services

Supervisory Agency

150

Supplementary statements prescribed by the Ordinance of the Croatian Financial Services Supervisory Agency Pursuant to the Ordinance on the structure and content of the financial statements of insurance and reinsurance companies (OG 132/10, 39/12) which was issued by the Croatian Financial Services Supervisory Agency on the basis of the Insurance Act and the Accounting Act, below we present the financial statements of the company CROATIA osiguranje d.d., Zagreb in the form required by the stated Ordinance.

The reconciliation between the financial statements, presented below on pages 151 to 167 as prescribed by the Ordinance on the structure and content of the financial statements of insurance and reinsurance Companies, and the annual financial statements prepared in accordance with the IFRS reporting framework is presented on pages 169 to 181 entitled "Reconciliation of financial statements".

CROATIA osiguranje d.d., Zagreb Supplementary statements prescribed by the Ordinance of the Croatian Financial Services Supervisory Agency

151

Statement of financial position (balance sheet) as at 31 December 2015 ASSETS

in HRK

Position No. Sum elements Position marking

Position description

Previous year Current year

Life Non-life Total Life Non-life Total

001 002+003 A CLAIMS FOR SUBSCRIBED AND UNPAID CAPITAL

002 1 Called-up capital

003 2 Uncalled capital

004 005+006 B INTANGIBLE ASSETS 10,828,283 10,828,283 0 14,333,691 14,333,691

005 1 Goodwill 0

006 2 Other intangible assets 10,828,283 10,828,283 14,333,691 14,333,691

007 008+009+010 C TANGIBLE ASSETS 738,628,384 738,628,384 0 732,482,249 732,482,249

008 1 Land and buildings used for business activities

716,354,951 716,354,951 700,868,977 700,868,977

009 2 Equipment 17,828,699 17,828,699 14,013,695 14,013,695

010 3 Other tangible assets and inventories 4,444,734 4,444,734 17,599,578 17,599,578

011 012+013+017+036 D INVESTMENTS 2,240,764,820 3,934,571,726 6,175,336,547 2,416,956,165 3,910,824,965 6,327,781,130

012 I Investments in land and buildings not used for business activities

514,715,135 514,715,135 479,754,760 479,754,760

013 014+015+016 II Investments in subsidiaries, associates and participation in joint ventures

421,370,992 421,370,992 0 421,415,761 421,415,761

014 1 Shares and stakes in subsidiaries 389,111,292 389,111,292 389,156,061 389,156,061

015 2 Shares and stakes in associates 4,259,700 4,259,700 4,259,700 4,259,700

016 3 Participation in joint ventures 28,000,000 28,000,000 28,000,000 28,000,000

017 018+021+026+032 III Other financial investments 2,240,764,820 2,998,485,600 5,239,250,420 2,416,956,165 3,009,654,444 5,426,610,609

018 019+020 1 Held-to-maturity investments 1,395,070,434 848,512,148 2,243,582,581 1,209,820,410 875,847,754 2,085,668,164

019 1.1 Debt securities and other securities with fixed income

1,395,070,434 848,512,148 2,243,582,581 1,209,820,410 875,847,754 2,085,668,164

020 1.2 Other investments held to maturity 0


152

Statement of financial position (balance sheet) as at 31 December 2015 ASSETS

in HRK

Position No.

Sum elements Position marking




021 022+023+024+025 2 Investments available for sale 333,114,110 701,409,187 1,034,523,298 744,973,829 863,223,532 1,608,197,362

022 2.1 Stocks, shares and other securities with variable income

28,100,427 271,820,309 299,920,736 10,223,402 247,234,785 257,458,188


305,013,683 405,686,626 710,700,309 734,750,427 589,374,360 1,324,124,787

024 2.3 Shares in investment funds 23,902,253 23,902,253 26,614,387 26,614,387

025 2.4 Other investments available for sale 0

026 027+028+029+030+031 3 Investments at fair value through profit and loss

109,088,399 176,374,180 285,462,579 58,270,308 12,952,845 71,223,153

027 3.1 Stocks, shares and other securities with variable income

14,721,774 14,721,774 12,952,845 12,952,845


41,945,345 43,534,413 85,479,758 45,262,895 0 45,262,895

029 3.3 Derivative financial instruments 0

030 3.4 Shares in investment funds 67,143,054 118,117,993 185,261,047 13,007,413 0 13,007,413

031 3.5 Other investments 0

032 033+034+035 4 Deposits, loans and receivables 403,491,877 1,272,190,085 1,675,681,962 403,891,618 1,257,630,313 1,661,521,930

033 4.1 Deposits with credit institutions (banks) 360,690,425 1,086,986,641 1,447,677,066 331,463,140 1,030,393,334 1,361,856,474

034 4.2 Loans 42,801,452 185,203,444 228,004,896 72,428,477 227,236,979 299,665,456

035 4.3 Other loans and receivables 0

036 IV Deposits at insurance business ceded to reinsurance (deposits with cedent)

0

037 E INVESTMENTS FOR THE ACCOUNT AND RISK OF LIFE INSURANCE POLICYHOLDER

5,311,503 5,311,503 34,582,317 34,582,317


153

Statement of financial position (balance sheet) as at 31 Dec 2015 ASSETS

in HRK

Position No.





038 039+040+041+042

+043+044+045 F REINSURANCE SHARE IN TECHNICAL PROVISIONS 321,003 339,094,600 339,415,603 271,385 306,497,869 306,769,254

039 1 Unearned premiums, reinsurance share 2,361 40,225,279 40,227,640 1,952 31,959,441 31,961,392

040 2 Mathematical provisions for insurance, reinsurance share

318,643 318,643 269,434 269,434

041 3 Claims provisions, reinsurance share 298,869,321 298,869,321 274,538,429 274,538,429

042 4 Provisions for premium returns dependent and independent of the result (bonuses and discounts), reinsurance share

0

043 5 Provisions for claims fluctuation, reinsurance share 0

044 6 Other technical provisions for insurance, reinsurance share

0

045 7 Special provisions for life insurance where the policyholder bears the investment risk, reinsurance share

0

046 047+048 G DEFERRED AND CURRENT TAX ASSETS 3,027,828 172,645,306 175,673,134 1,049,513 132,951,449 134,000,962

047 1 Deferred tax assets 3,027,828 144,545,547 147,573,375 1,049,513 126,240,946 127,290,459

048 2 Current tax assets 28,099,759 28,099,759 6,710,504 6,710,504

049 050+053+054 H RECEIVABLES 3,551,201 666,768,265 670,319,466 3,419,115 728,239,204 731,658,319

050 051+052 1 Receivables from direct insurance business 51,975 407,213,297 407,265,272 560,451 380,451,419 381,011,869

051 1.1 From policyholders 406,187,749 406,187,749 376,046,572 376,046,572

052 1.2 From agents or insurance brokers 51,975 1,025,548 1,077,523 560,451 4,404,847 4,965,297

053 2 Receivables from insurance and reinsurance business 6,206,267 6,206,267 2,216 25,839,320 25,841,536


154

Statement of financial position (balance sheet) as at 31 December 2015

ASSETS

in HRK

Position No.





054 055+056+057 3 Other receivables 3,499,226 253,348,702 256,847,927 2,856,449 321,948,465 324,804,914

055 3.1 Receivables from other insurance business

180,197,358 180,197,358 244,413,499 244,413,499

056 3.2 Receivables for returns on investments 1,386,297 6,579,406 7,965,703 1,213,941 7,161,918 8,375,858

057 3.3 Other receivables 2,112,928 66,571,938 68,684,866 1,642,508 70,373,048 72,015,556

058 059+063+064 I OTHER ASSETS 30,379,349 72,559,386 102,938,735 26,912,507 31,634,076 58,546,582

059 060+061+062 1 Cash at bank and on hand 30,375,939 70,799,380 101,175,319 26,911,735 31,448,477 58,360,211

060 1.1 Funds in the business account 70,754,171 70,754,171 31,417,310 31,417,310

061 1.2 Funds in the account of assets covering mathematical provisions

30,375,931 30,375,931 26,906,601 26,906,601

062 1.3 Cash on hand 8 45,210 45,217 5,134 31,167 36,300

063 2 Non-current assets held for sale and discontinued operations

0

064 3 Others 3,410 1,760,005 1,763,416 772 185,599 186,371

065 066+067+068 J PREPAID EXPENSES AND ACCRUED INCOME

36,659,792 38,696,785 75,356,577 42,840,881 33,634,035 76,474,916

066 1 Accrued interest and rent 36,628,472 27,714,433 64,342,905 42,840,881 26,727,247 69,568,128

067 2 Deferred acquisition costs 0

068 3 Other prepaid expenses and accrued income

31,320 10,982,352 11,013,672 0 6,906,788 6,906,788

069 001+004+007+011

+037+038+046 +049+058+065

K TOTAL ASSETS (A+B+C+D+E+F+G+H+I+J)

2,320,015,497 5,973,792,735 8,293,808,232 2,526,031,882 5,890,597,538 8,416,629,420

070 L OFF BALANCE-SHEET ITEMS 1,177,771,285 1,177,771,285 71,168 1,143,378,952 1,143,450,120


155


LIABILITIES

in HRK

Position No.


Position description Previous year Current year


071 072+076+077+081+085+088 A EQUITY 153,793,344 1,711,684,604 1,865,477,949 149,669,484 1,734,390,912 1,884,060,396

072 073+074+075 1 Share capital 44,288,720 557,287,080 601,575,800 44,288,720 557,287,080 601,575,800

073 1.1 Paid-up capital - ordinary shares 44,288,720 545,037,080 589,325,800 44,288,720 545,037,080 589,325,800

074 1.2 Paid-up capital - preference shares 12,250,000 12,250,000 12,250,000 12,250,000

075 1.3 Called-up capital

076 2 Share premium (capital reserves) 681,482,525 681,482,525 681,482,525 681,482,525

077 078+079+080 3 Revaluation reserves 10,398,213 161,183,135 171,581,348 4,296,432 137,673,765 141,970,197

078 3.1 Land and buildings 63,831,734 63,831,734 62,790,022 62,790,022

079 3.2 Financial investments 10,398,213 97,351,401 107,749,614 4,296,432 74,883,743 79,180,174

080 3.3 Other revaluation reserves

081 082+083+084 4 Reserves 83,803,430 429,203,402 513,006,832 83,803,430 311,731,864 395,535,294

082 4.1 Legal reserves 721,929 22,853,579 23,575,508 721,929 22,853,579 23,575,508

083 4.2 Statutory reserves 7,581,501 139,638,995 147,220,496 7,581,501 139,638,995 147,220,496

084 4.3. Other reserves 75,500,000 266,710,827 342,210,827 75,500,000 149,239,289 224,739,289

085 086+087 5 Retained earnings and accumulated loss

19,759,024 290,917,509 310,676,533 15,302,981 1,422,754 16,725,736

086 5.1 Retained earnings 19,759,024 290,917,509 310,676,533 15,302,981 1,422,754 16,725,736

087 5.2 Accumulated loss (-)

088 089+090 6 Profit or loss for the period -4,456,043 -408,389,047 -412,845,090 1,977,921 44,792,924 46,770,844

089 6.1 Profit for the period 1,977,921 44,792,924 46,770,844

090 6.2 Loss for the period ( - ) -4,456,043 -408,389,047 -412,845,090

091 B MINORITY LIABILITIES (SUBORDINATED LIABILITIES)


156


LIABILITIES

in HRK

Position No.




092 093+094+095+096

+097+098 C TECHNICAL PROVISIONS 2,102,145,887 3,580,383,579 5,682,529,465 2,300,217,157 3,501,106,799 5,801,323,955

093 1 Unearned premiums, gross amount 2,607,291 810,227,910 812,835,201 3,722,176 787,050,999 790,773,175

094 2 Mathematical provisions for insurance, gross amount

2,071,853,669 2,071,853,669 2,266,361,479 2,266,361,479

095 3 Claims provisions, gross amount 27,684,927 2,673,429,429 2,701,114,356 30,133,502 2,641,835,167 2,671,968,668

096 4

Provisions for premium returns dependent and independent of the result (bonuses and discounts), gross amount

1,415,100 1,415,100

097 5 Provisions for claims fluctuation, gross amount

4,326,239 4,326,239 7,055,533 7,055,533

098 6 Other technical provisions, gross amount

92,400,000 92,400,000 63,750,000 63,750,000

099 D

SPECIAL PROVISIONS FOR LIFE INSURANCE WHERE THE POLICYHOLDER BEARS THE INVESTMENT RISK, gross amount

5,311,503 5,311,503 34,582,317 34,582,317

100 101+102 E OTHER PROVISIONS 27,210,743 223,160,325 250,371,068 12,756,540 96,633,577 109,390,116

101 1 Provisions for pensions and similar obligations

27,210,743 221,279,945 248,490,687 12,756,540 94,753,196 107,509,736

102 2 Other provisions 1,880,381 1,880,381 1,880,381 1,880,381

103 104+105 F DEFERRED AND CURRENT TAX LIABILITY

3,326,529 48,427,801 51,754,329 1,801,488 34,418,441 36,219,929

104 1 Deferred tax liabilities 3,326,529 40,296,906 43,623,435 1,801,083 34,418,441 36,219,524

105 2 Current tax liability 8,130,894 8,130,894 405 405

106 G DEPOSITS RETAINED FROM BUSINESS CEDED TO REINSURANCE


157


LIABILITIES

in HRK

Position No.




107 108+109+110 H FINANCIAL LIABILITIES

108 1 Loan liabilities

109 2 Liabilities for issued securities

110 3 Other financial liabilities

111 112+113+114+115 I OTHER LIABILITIES 23,424,685 187,730,444 211,155,129 20,874,084 219,900,776 240,774,860

112 1 Liabilities from direct insurance business

3,731,279 79,556,222 83,287,501 3,105,229 111,594,696 114,699,925

113 2 Liabilities from coinsurance and reinsurance

1,353 8,956,789 8,958,142 196,461 40,350,177 40,546,638

114 3 Liabilities for disposal and discontinued operations

115 4 Other liabilities 19,692,052 99,217,433 118,909,486 17,572,394 67,955,903 85,528,297

116 117+118 J ACCRUED EXPENSES AND DEFERRED INCOME

4,802,807 222,405,983 227,208,789 6,130,814 304,147,032 310,277,846

117 1 Deferred reinsurance commission

118 2 Other accrued expenses and deferred income

4,802,807 222,405,983 227,208,789 6,130,814 304,147,032 310,277,846

119 071+091+092+099+100+103

+106+107+111 +116

K TOTAL LIABILITIES (A+B+C+D+E+F+G+H+I+J)

2,320,015,497 5,973,792,735 8,293,808,232 2,526,031,882 5,890,597,538 8,416,629,420

120 L OFF-BALANCE-SHEET ITEMS 1,177,771,285 1,177,771,285 71,168 1,143,378,952 1,143,450,120


158

Statement of comprehensive income (profit and loss) for the period 1 January 2015 – 31 December 2015

in HRK

Position No.




001 002+003+004+005+006

+007+008+009 I Earned premiums (income) 366,486,262 1,667,636,447 2,034,122,709 511,995,489 1,544,461,387 2,056,456,876

002 1 Gross written premiums 366,588,588 1,913,316,598 2,279,905,186 513,507,500 1,794,422,101 2,307,929,601

003 2 Coinsurance premiums

004 3 Impairment and collectedinsurance / coinsurance premium previously impaired

-50,603,385 -50,603,385 -6,484,218 -6,484,218

005 4 Premiums ceded to reinsurance (-) -246,965 -309,800,719 -310,047,684 -396,717 -256,781,167 -257,177,884

006 5 Premiums ceded to coinsurance (-) -1,606,401 -1,606,401

007 6 Change in gross provisions for unearned premiums (+/-)

145,425 122,508,450 122,653,875 -1,114,886 23,176,911 22,062,025

008 7 Change in provisions for unearned premiums, reinsurance share (+/-)

-786 -7,784,497 -7,785,283 -409 -8,487,170 -8,487,579

009 8 Change in provisions for unearned premiums, coinsurance share (+/-)

221,331 221,331

010 011+012+016+017+018

+022+023 II Investment income 120,638,458 212,854,801 333,493,259 115,290,439 227,776,973 343,067,412

011 1 Income from subsidiaries, associates and participation in joint ventures

185,700 26,437,836 26,623,536 17,576,603 17,576,603

012 013+014+015 2 Income from investments in land and buildings

55,116,258 55,116,258 0 38,546,392 38,546,392

013 2.1 Rental income 25,657,099 25,657,099 24,949,529 24,949,529

014 2.2 Income from increased value of land and buildings

29,405,968 29,405,968 13,596,863 13,596,863

015 2.3 Revenues from sales of land and buildings

53,191 53,191

016 3 Interest income 109,439,084 105,345,882 214,784,965 111,295,638 121,283,687 232,579,324

017 4 Unrealized profits from investments at fair value through profit or loss

2,700,896 8,224,022 10,924,918 754,490 362,615 1,117,104


159


in HRK

Position No.





018 019+020+021 5 Gains on sale (realization) of financial investments

1,595,476 3,978,357 5,573,833 2,786,440 10,868,691 13,655,130

019 5.1 Investments at fair value through profit and loss

1,595,476 3,567,823 5,163,299 1,491,901 2,209,523 3,701,424

020 5.2 Investments available for sale 410,534 410,534 1,294,539 8,659,167 9,953,706

021 5.3 Other gains on sale of financial investments

022 6 Net foreign exchange gains 6,296,300 7,822,550 14,118,850 8,019,517 8,019,517

023 7 Other investment income 421,002 5,929,898 6,350,899 453,872 31,119,469 31,573,341

024 III Income from fees and commissions 8,473 22,441,204 22,449,677 16,422 33,311,472 33,327,894

025 IV Other insurance - technical income, net of reinsurance

319,798 50,218,365 50,538,163 44,171 18,751,547 18,795,718

026 V Other income 234,493 18,018,308 18,252,801 71,794 33,665,838 33,737,633

027 028+032 VI Claims incurred, net -263,134,642 -980,658,619 -1,243,793,261 -269,154,159 -955,491,086 -1,224,645,245

028 029+030+031 1 Settled claims -262,748,698 -992,571,976 -1,255,320,674 -266,705,584 -962,754,456 -1,229,460,041

029 1.1 Gross amount (-) -262,748,698 -1,140,632,604 -1,403,381,301 -266,705,584 -1,066,799,985 -1,333,505,570

030 1.2 Coinsurance share (+) 1,769,550 1,769,550

031 1.3 Reinsurance share(+) 148,060,627 148,060,627 102,275,979 102,275,979

032 033+034+035 2 Change in claims provisions (+/-) -385,944 11,913,358 11,527,413 -2,448,575 7,263,370 4,814,796

033 2.1 Gross amount (-) -385,944 -8,267,870 -8,653,814 -2,448,575 31,594,263 29,145,688

034 2.2 Coinsurance share (+) 531,525 531,525

035 2.3 Reinsurance share(+) 20,181,227 20,181,227 -24,862,417 -24,862,417


160


in HRK

Position No.





036 037+040 VII Change in mathematical and other technical provisions, net of reinsurance

-116,549,380 -49,327,604 -165,876,984 -194,557,019 24,505,606 -170,051,413

037 038+039 1 Change in mathematical provisions for insurance (+/-)

-116,549,380 -116,549,380 -194,557,019 0 -194,557,019

038 1.1 Gross amount (-) -116,583,274 -116,583,274 -194,507,810 -194,507,810

039 1.2 Reinsurance share(+) 33,894 33,894 -49,209 -49,209

040 041+042+043 2 Change in other technical provisions, net of reinsurance (+/-)

-49,327,604 -49,327,604 0 24,505,606 24,505,606

041 1.1 Gross amount (-) -49,327,604 -49,327,604 24,505,606 24,505,606

042 1.2 Coinsurance share (+) 0

043 1.3 Reinsurance share(+) 0

044 045+046+047 VIII Change in special provisions for life insurance where the policyholder bears the investment risk, net of reinsurance (+/-)

4,541,840 4,541,840 -29,111,101 -29,111,101

045 1 Gross amount (-) 4,541,840 4,541,840 -29,111,101 -29,111,101

046 2 Coinsurance share (+) 0

047 3 Reinsurance share(+) 0

048 049+050 IX Expenses for premium returns (bonuses and discounts), net of reinsurance

049 1 Dependent of result (bonuses)

050 2 Independent of result (discounts)


161


in HRK

Position No.

Sum elements Position

marking Position description



051 052+056 X Operating expenses (business expenditures), net

-114,901,915 -970,686,822 -1,085,588,737 -106,847,813 -701,245,623 -808,093,436

052 053+054

+055 1 Acquisition costs -36,840,432 -331,852,709 -368,693,141 -55,522,658 -323,351,283 -378,873,940

053 1.1 Commission -20,768,524 -227,780,785 -248,549,309 -34,630,848 -212,973,273 -247,604,122

054 1.2 Other acquisition costs -16,071,908 -104,071,925 -120,143,833 -20,891,809 -110,378,009 -131,269,818

055 1.3 Change inideferred acquisition costs (+/-)

056 057+058

+059 2

Administration costs (administrative expenses)

-78,061,483 -638,834,113 -716,895,596 -51,325,155 -377,894,340 -429,219,496

057 2.1 Depreciation -1,705,830 -40,378,713 -42,084,543 -1,411,053 -36,273,511 -37,684,564

058 2.3. Salaries, taxes and contributions from and on salaries

-31,471,437,44 -237,199,196 -268,670,633 -27,993,357 -199,091,492 -227,084,849

059 2.4. Other administrative expenses -44,884,215,54 -361,256,204 -406,140,420 -21,920,746 -142,529,338 -164,450,083

060

061+062+063+064+065+066+067

XI Investment expenses -2,425,166 -308,576,358 -311,001,524 -23,452,934 -122,542,382 -145,995,316

061 1 Depreciation of land and buildings not intended for business activities

062 2 Interest -575,699 -575,699

063 3 Impairment of investments -1,180,566 -96,766,571 -97,947,137 -16,511,902 -69,077,629 -85,589,531

064 4 Losses from sale (realization) of financial assets

-146,697 -228,489 -375,186 -90,065 -1,852,557 -1,942,622

065 5 Adjustment of financial assets at fair value through profit and loss

-566,159 -2,604,672 -3,170,831 0 -2,093,198 -2,093,198

066 6 Net foreign exchange losses -6,219,461 -6,219,461

067 7 Other investment expenses -531,744 -208,400,928 -208,932,673 -631,507 -49,518,998 -50,150,504

068 069+070 XII Other technical expenses, net of reinsurance

-247,031 -58,417,737 -58,664,768 -339,053 -27,822,633 -28,161,686

069 1 Prevention activities expenses

070 2 Other tehnical expenses of insurance -247,031 -58,417,737 -58,664,768 -339,053 -27,822,633 -28,161,686


162


in HRK

Position No.





071 XIII Other expenses, including value adjustments

-468,885 -111,425,942 -111,894,827 0 -12,273,576 -12,273,576

072

001+010+024+025+026+027+036+044+048+051+060+068+071

XIV Profit or loss for the period before tax (+/-)

-5,497,696 -507,923,956 -513,421,652 3,956,236 63,097,525 67,053,761

073 074+075 XV Income or loss tax 1,041,653 99,534,909 100,576,562 -1,978,315 -18,304,601 -20,282,917

074 1 Current tax expense

075 2 Deferred tax expense (income) 1,041,653 99,534,909 100,576,562 -1,978,315 -18,304,601 -20,282,917

076 072+073 XVI Profit or loss for the period after tax (+/-)

-4,456,043 -408,389,047 -412,845,090 1,977,921 44,792,924 46,770,844

077 1 Attributable to equity holders of the parent company

078 2 Attributable to non-controlling interest

079 001+010+024+0

25+026+075 XVII TOTAL INCOME 488,729,137 2,070,704,034 2,559,433,171 625,440,000 1,839,662,616 2,465,102,616

080 027+036+044+048+051+060+06

8+071+074 XVIII TOTAL EXPENSE -493,185,180 -2,479,093,081 -2,972,278,261 -623,462,079 -1,794,869,692 -2,418,331,771


163


in HRK

Position No.





081 082+083+084+085+086+087+088+089

XIX Other comprehensive income 8,400,300 28,802,332 37,202,632 -6,101,781 -22,371,164 -28,472,946

082 1 Gains / losses on translation of financial statements of foreign operations

0

083 2 Gains / losses on revaluation of financial assets available for sale

8,400,300 90,076,265 98,476,565 -6,101,781 -22,467,658 -28,569,440

084 3 Gains / losses on revaluation of land and buildings intended for business activities

-61,273,933 -61,273,933 96,494 96,494

085 4 Gains / losses on revaluation of other tangible (except for land and buildings) and intangible assets

086 5 Effects of cash flow hedging instruments

087 6 Actuarial gains / losses on pension plans with defined pensions

088 7 Share in other comprehensive income of associates

089 8 Income tax on other comprehensive income

090 076+081 XX Total comprehensive income 3,944,257 -379,586,715 -375,642,458 -4,123,860 22,421,759 18,297,899

091 1 Attributable to equity holders of the parent company

092 2 Attributable to non-controlling interest

093 XXI Reclassification adjustments


Supervisory Agency

164

STATEMENT OF CASH FLOWS (INDIRECT METHOD) for the period 1 January 2015 – 31 December 2015 in HRK

Position No.


Position description Current period

Same period last year

001 002+013+031 I CASH FLOW FROM OPERATING ACTIVITIES -76,111,479 -869,368,214

002 003+004 1 Cash flow before changes in operating assets and liabilities

-51,566,869 -215,208,450

003 1.1 Profit/loss before tax 67,053,761 -513,421,652

004 005+006+007

+008+009+010 +011+012

1.2 Adjustments: -118,620,630 298,213,202

005 1.2.1 Depreciation of property and equipment 31,882,454 37,770,397

006 1.2.2 Amortization 5,802,109 4,314,145

007 1.2.3 Impairment and gains / losses on fair valuation 55,929,079 405,885,258

008 1.2.4 Interest expense 575,699

009 1.2.5 Interest income -232,579,324 -214,784,965

010 1.2.6 Share in profit of associates

011 1.2.7 Gains / losses on sale of tangible assets (including land and buildings)

-34,657,807

012 1.2.8 Other adjustments 20,345,051 99,110,475

013 014+015+…+0

30 2 Increase / decrease in operating assets and liabilities -16,009,068 -628,231,938

014 2.1 Increase / decrease in investments available for sale -573,674,064 -757,975,558

015 2.2 Increase / decrease in investments valued at fair value through profit and loss

168,804,064 172,945,368

016 2.3 Increase / decrease in deposits, loans and receivables 78,489,224 -527,792,981

017 2.4 Increase / decrease of deposits at insurance business ceded to reinsurance

018 2.5 Increase / decrease in investments for the account and risk of life insurance policyholder

-29,270,814 3,077,354

019 2.6 Increase / decrease of reinsurance share in technical provisions

32,646,349 -12,429,839

020 2.7 Increase / decrease in tax assets 41,672,172 -120,720,263

021 2.8 Increase / decrease in receivables 153,663,868 367,728,719

022 2.9 Increase / decrease in other assets

023 2.10 Increase / decrease in prepaid expenses and accrued income

-1,118,339 -9,093,176

024 2.11 Increase / decrease in technical provisions 118,794,490 51,910,817

025 2.12 Increase / decrease in technical provisiosn for life insurance when the policyholder bears the investment risk

29,270,814 -3,077,354

026 2.13 Increase / decrease in tax liabilities -6,998,859 11,425,091

027 2.14 Increase / decrease in deposits retained from business ceded to reinsurance

028 2.15 Increase / decrease in financial liabilities

029 2.16 Increase / decrease in other liabilities -111,357,031 145,014,974

030 2.17 Increase / decrease in accrued expenses and deferred income

83,069,057 50,754,910

031 3 Income tax paid -8,535,541 -25,927,826


Supervisory Agency

165

STATEMENT OF CASH FLOWS (INDIRECT METHOD) for the period 1 January 2015 – 31 December 2015

in HRK

Position No.


Position description Current period Same period last

year

032 033+034+…+046 II CASH FLOW FROM INVESTING ACTIVITIES 33,523,572 389,231,920

033 1 Proceeds from sale of tangible assets 745,019 8,703,337

034 2 Expenditures for purchases of tangible assets -20,015,662 -37,770,397

035 3 Proceeds from sale of intangible assets 3,942,220

036 4 Expenditures for purchases of intangible assets -9,961,678 -4,314,145

037 5 Proceeds from the sale of land and buildings not used for business activities

145,175 -2,990,390

038 6 Expenditures for the purchase of land and buildings not used for business activities

-2,270,892

039 7 Increase / decrease in investments in subsidiaries, associates and participation in joint ventures

-39,374,976 -55,744,779

040 8 Proceeds from held-to-maturity investments 245,646,634 395,281,805

041 9 Expenditures for held-to-maturity investments -94,637,460

042 10 Proceeds from sale of securities and shares

043 11 Expenditures for investments in securities and shares

044 12 Proceeds from dividends and share in profit 17,576,603 26,623,536

045 13 Proceeds from repayment of given short-term and long-term loans

159,594,430 118,422,760

046 14 Expenditure for given long-term and short-term loans

-223,923,622 -62,922,026

047 048+049+050

+051+052 III CASH FLOW FROM FINANCING ACTIVITIES -4,190 488,210,420

048 1 Proceeds from share capital increase 840,171,125

049 2 Proceeds from received short-term and long-term loans

750,575,699

050 3 Expenditure for repayment of short-term and long-term loans

-1,101,207,973

051 4 Expenditure for purchase of own shares

052 5 Expenditure for payment of shares in profit (dividends)

-4,190 -1,328,432

053 001+032+047 NET CASH FLOW -42,592,097 8,074,126

054 IV EFFECTS OF FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

-1,800,056 -14,118,850

055 053+054 V NET INCREASE / DECREASE IN CASH AND CASH EQUIVALENTS

-44,392,153 -6,044,724

056 1 Cash and cash equivalents at beginning of period 102,938,735 108,983,459

057 055+056 2 Cash and cash equivalents at end of period 58,546,582 102,938,735


Supplementary statements prescribed by the Ordinance of the Croatian Financial Services Supervisory Agency

166

STATEMENT OF CHANGES IN EQUITY for the period 1 January 2015 – 31 December 2015

in HRK

Position No.


Attributable to owners of the parent company

Attributable to non-

controlling interests

Total equity Paid-up capital (ordinary and

preference shares)

Share premium

Revaluation reserves

Reserves (legal,

statutory, other)

Retained earnings or

accumulated loss

Profit / loss for the year

Total equity

I. Balance at1 January of previous year 442,887,200 0 136,839,280 508,689,733 295,629,531 17,268,395 1,401,314,140 1,401,314,140

1. Changes in accounting policies 0 0

2. Correction of prior periods errors 0 0

II. Balance at 1 January of previous year 442,887,200 0 136,839,280 508,689,733 295,629,531 17,268,395 1,401,314,140 1,401,314,140

III. Comprehensive income or loss of the previous year

0 0 37,202,632 0 0 -412,845,090 -375,642,458 -375,642,458

1. Profit or loss for the period -412,845,090 -412,845,090 -412,845,090

2. Other comprehensive income or loss of the previous year

0 0 37,202,632 0 0 0 37,202,632 37,202,632

2.1. Unrealized gains or losses from tangible assets (land and buildings)

-61,273,933 -61,273,933 -61,273,933

2.2. Unrealized gains or losses from financial assets available for sale

98,128,983 98,128,983 98,128,983

2.3. Realized gains or losses from financial assets available for sale

347,582 347,582 347,582

2.4. Other non-owner changes in equity

IV. Transactions with owners (previous period)

158,688,600 681,482,525 -2,460,564 4,317,099 15,047,002 -17,268,395 839,806,266 839,806,266

1. Increase / decrease of share capital 158,688,600 681,482,525 840,171,125 840,171,125

2. Other payments by owners

3. Payment of shares in profit / dividends -980,000 -980,000 -980,000

4. Other distributions to owners -2,460,564 4,317,099 15,047,002 -16,288,395 615,141 615,141

V. Situation on the last day of the reporting period in the previous year

601,575,800 681,482,525 171,581,348 513,006,832 310,676,533 -412,845,090 1,865,477,949 1,865,477,949



167

STATEMENT OF CHANGES IN EQUITY for the period 1 January 2015 – 31 December 2015

in HRK

Position No.


Attributable to owners of the parent company

Attributable to non-

controlling interests

Total equity

Paid-up capital

(ordinary and preference

shares)

Share premium

Revaluation reserves

Reserves (legal,

statutory, other)

Retained earnings or

accumulated loss

Profit / loss for the year

Total equity

VI. Balance at 1 January of current year 601,575,800 681,482,525 171,581,348 513,006,832 310,676,533 -412,845,090 1,865,477,949 1,865,477,949

1. Changes in accounting policies

2. Correction of prior periods errros

VII. Balance at 1 January of current year 601,575,800 681,482,525 171,581,348 513,006,832 310,676,533 -412,845,090 1,865,477,949 1,865,477,949

VIII. Comprehensive income or loss of the current year

0 0 -28,472,948 0 0 46,770,844 18,297,897 18,297,897

1. Profit or loss for the period 46,770,844 46,770,844 46,770,844

2. Other comprehensive income or loss of the current year

0 0 -28,472,948 0 0 0 -28,472,948 -28,472,948

2.1. Unrealized gains or losses from tangible assets (land and buildings)

96,492 96,492 96,492

2.2. Unrealized gains or losses from financial assets available for sale

-34,427,893 -34,427,893 -34,427,893

2.3. Realized gains or losses from financial assets available for sale

5,858,453 5,858,453 5,858,453

2.4. Other non-owner changes in equity

IX. Transactions with owners (current period) 0 0 -1,138,204 -117,471,538 -293,950,798 412,845,090 284,551 284,551

1. Increase / decrease of sharecapital

2. Other payments by owners

3. Payment of shares in profit / dividends

4. Other distributions to owners -1,138,204 -117,471,538 -293,950,798 412,845,090 284,551 284,551

X. Situation on the last day of the reporting period in the current year

601,575,800 681,482,525 141,970,197 395,535,294 16,725,736 46,770,844 1,884,060,396 1,884,060,396


Supervisory Agency

168

Reconciliation of the financial statements and supplementary statements for the Croatian Financial Services Supervisory Agency The reconciliation between the financial statements set out on pages 151 to 167, as prescribed by the Ordinance on the structure and content of financial statements of insurance and reinsurance companies, and the annual financial statements prepared in accordance with the IFRS reporting framework is presented on pages 169 to 176.



169


Supplementary statements

prescribed by the Ordinance

of the Croatian Financial Services

Supervisory Agency

Other tangible assets and

inventories transferred to

other receivables

Transfer of investments for the account and risk of

life insurancepolicyholder to financial assets at fair value through

profit or loss

Transfer of current tax assets

to other receivables and

netting of deferred taxes

Transfer of deferred income and prepaid

expenses to other receivables

Transfer of received checks and bills of

exchange from cash to other receivables

Netting of assets and

liabilities between

segments

Statutory financial

statements


INTANGIBLE ASSETS 14,334

14,334 Intangible assets

Goodwill 14,334

-

Other intangible assets

-

TANGIBLE ASSETS 732,482 (294)

732,188 Property and equipment

Land and buildings used for business activities

700,869

700,869

Equipment 14,014

14,014

Other tangible assets 17,600 (294)

17,305

INVESTMENTS 6,327,781

34,582

6,362,363 Investments in land and

buildings not intended for business activities

479,755

479,755 Investment property

Investments in subsidiaries, associates and joint ventures

421,416

421,416 Investments in subsidiaries and associates and participation in joint ventures


2,085,668

2,085,668 Held-to-maturity investments

Financial assets available for sale

1,608,197

1,608,197 Financial assets available for sale


71,223

34,582

105,805 Financial assets at fair value through profit or loss

Loans and receivables 1,661,522

1,661,522 Loans and receivables

INVESTMENTS FOR THE

ACCOUNT AND RISK OF LIFE INSURANCE POLICYHOLDER 34,582

(34,582)

-

Investments for the account and risk of life insurance policyholder

34,582

(34,582)

-



170





Supervisory Agency

Other tangible assets and

inventories transferred to other

receivables

Transfer of investments for the account and

risk of life insurance

policyholder to financial assets

at fair value through profit

or loss

Transfer of current tax

assets to other receivables and

netting of deferred taxes

Transfer of deferred income and prepaid

expenses to other receivables

Transfer of received checks and bills of

exchange from cash to other receivables

Netting of assets and liabilities

between segments

Statutory financial statements


REINSURANCE SHARE IN TEHNICAL PROVISIONS

306,769

306,769 Reinsurance share in technical provisions

Unearned premiums, reinsurance share 31,961

- Mathematical provisions, reinsurance share 269

-

Claims provisions, reinsurance share 274,538

-

DEFERRED AND CURRENT TAX ASSETS 134,001

(42,930)

91,071 Deffered tax assets

Deffered tax assets 127,290

(36,220)

- Current tax assets 6,711

(6,711)

-

RECEIVABLES

731,658 294

6,711 76,475 186 (15,697) 799,628 Insurance contract and other receivables

Receivables from direct insurance business 381,012

381,012 Receivables from insurance and reinsurance

business 25,842

25,842

Other receivables 324,805 294

6,711 76,475 186 (15,697) 392,774

CASH AND CASH EQUIVALENTS 58,547

-186

58,360 Cash and cash equivalents

Cash at bank and on hand 58,360

-

-

Other 186

-186

-

ACCRUED EXPENSES AND DEFERRED INCOME 76,475

(76,475)

-

TOTAL ASSETS 8,416,629 (36,220) (15,697) 8,364,713



171

Statement of financial position (balance sheet) as at 31 Dec 2015




Supervisory Agency

Transfer of loss for the year to

retained earnings

Transfer of special provision for life insurance group where the

policyholder bears the risk

to technical provisions

Transfer of liability for

housing fund from other

reserves in other liabilities

Transfer of accrued

expenses and

deferred income to

other liabilities


liability to other

liabilities and netting of

deferred taxes

Netting of assets and liabilities

between segments

Statutory financial

statements


EQUITY 1,884,060

1,884,060 Share capital 601,576

601,576 Share capital

Share premiums (capital reserves) 681,483

681,483 Premium shares

Revaluation reserves 141,970

141,970 Fair value reserve

Reserves 395,535

395,535 Reserves

Retained earnings/accumulated loss 16,726 46,771

63,497 Retained earnings

Profit for the year 46,771 (46,771)

-

TECHNICAL PROVISIONS 5,801,324

34,582

5,835,906 Techinical provisions

Unearned premiums, gross amount 790,773

-

Mathematical provisions, gross amount 2,266,361

-

Claims provisions, gross amount 2,671,969

34,582

-

Provisions for premium returns dependent and independent of the result (bonuses and discounts), gross amount

1,415

-

Provisions for claims fluctuations 7,056

-

Other insurance-technical provision, gross amount

63,750

-

TECHNICAL PROVISIONS, WHEN THE POLICYHOLDER BEARS THE RISK 34,582

(34,582)

-

Technical provisions for life insurance where the policyholder bears the risk

34,582 (34,582)

-



172





Supervisory Agency

Transfer of loss for the year to

retained earnings

Transfer of special provisions for life insurance

where the policyholder

bears the risk to technical

provisions

Transfer of liability for housing fund from

other reserves in other liabilities

Transfer of accrued

expenses and

deferred income to

other liabilities


liability to other

liabilities and netting of

deferred taxes

Netting of assets and

liabilities between

segments

Statutory financial

statements


OTHER PROVISIONS 109,390

(1,880)

107,510 Provisions Provisions for pensions and similar obligations

107,510

-

Other provisions 1,880

(1,880)

-

DEFERRED AND CURRENT TAX LIABILITY 36,220

(36,220)

- Deferred tax liabilities

Deferred tax liabilities 36,220

(36,220)

-

Current tax liability

-

FINANCIAL LIABILITIES -

- Financial liabilities

OTHER LIABILITIES

240,775

1,880 310,278

(15,697) 537,237

Liabilities from insurance contracts, other liabilities and deferred income

Liabilities from direct insurance business 114,700

-

Liabilities from coinsurance and reinsurance business

40,547

-

Liabilities for disposal and discontinued operations

-

Other liabilities 85,528

1,880 310,278

(15,697) -

ACCRUED EXPENSES AND DEFERRED INCOME

Accrued expenses and deferred income 310,278 (310,278) -

TOTAL LIABILITITES 8,416,629 (36,220) (15,697) 8,364,713



173





Supervisory Agency

Transfer of impairment of

premium receivables to gross written

premium

Transfer of premiums ceded

to coinsurance and changes in

provisions for unearned

premiums, coinsurance share

Transfer of other income

to other operating

income

Netting of foreign

exchange gains

Statutory financial statements


Gross written premiums 2,307,930 (6,484)

2,301,445 Gross written premiums

Imapirment and collected insurance / coinsurance premium previously impaired

(6,484) 6,484

Premiums ceded to reinsurance (-) (257,178)

(1,606)

(258,784) Premiums ceded to reinsurance and coinsurance

Premiums ceded to coinsurance (-) (1,606)

1,606

-

Change in gross provisiosnf or unearned premiums 22,062

22,062 Change in gross provisions for unearned premiums

Change in provisions for unearned premiums, reinsurance share (8,488)

221

(8,266) Change in provisions of unearned premiums, reinsurance and coinsurance share

Change in provisions for unearned premiums, coinsurance share 221

(221)

Earned premiums (income) 2,056,457

2,056,457

Income from subsidiaries, associates and participation in joint ventures

17,577

17,577

Income from investments in land and buildings 38,546

38,546

Interest income 232,579

232,579

Unrealized gains from investments at fair value through profit and loss

1,117

1,117

Gains on sale (realization) of financial assets 13,655

13,655

Net foreign exchange gains 8,020

12,951 20,970

Other investment income 31,573

31,573

Investment income 343,067

12,951 356,018 Finance income



174





Supervisory Agency

Transfer of other income

to other operating

income

Summarized presentation of claims incurred

Summarized presentation of

reinsurance in claims incurred

Transfer from other expenses, including

value adjustment, to administrative

expenses

Transfer of other income from long-

term provisions from Administrative

expenses to Other operating income

Statutory financial

statements

in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000

Income from fees and commissions 33,328

33,328 Income from fees and commissions

Other insurance - technical income, net of reinsurance 18,796 33,738

3,394 55,927 Other operating income

Other income 33,738 (33,738)

Setttled claims - gross (1,333,506)

1,333,506

Settled claims - coinsurance share 1,770

(1,770)

Settled claims – reinsurance share 102,276

(102,276)

Change in claims provisions - gross amount 29,146

(29,146)

Coinsurance share 532

(532)

Reinsurance share (24,862)

24,862

Change in mathematical provisions - gross amount (194,508)

194,508

Change in mathematical provisions – reinsurance share (49)

49

Change in other technical provisions, net of reinsurance 24,506

(24,506)


(29,111)

29,111

(1,503,473)

(1,503,473) Claims incurred

79,665

79,665 Reinsurance share in claims incurred

Acquisition costs (378,874)

(378,874) Acquisition costs

Administration costs (429,219)

(1,303) (3,394) (433,916) Administrative expenses

Operating expenses (business expenditures), net (808,093)



175





Supervisory Agency

Netting of foreign

exchange differences

Transfer from other technical

expenses to administrative

expenses

Transfer from other

expenses, including

value adjustments,

to other operating expenses

Statutory financial

statements

in HRK’000 in HRK’000 in HRK’000 in HRK’000 in HRK’000

Depreciation (buildings not intended for business activities)

Interest

Impairment of investments (85,590)

(85,590)

Losses from sale (realization) of investments (1,943)

(1,943)

Adjustment of financial assets at fair value through profit or loss (2,093)

(2,093)

Net foreign exchange losses (6,219) (12,951)

(19,170)

Other investment expenses (50,151)

(50,151)

Investment expenses (145,995) (12,951)

(158,946) Finance costs

Other technical expenses, net of reinsurance (28,162)

1,303 (12,274) (39,132) Other operating expenses

Other costs, including value adjustments (12,274)

12,274

Profit or loss for the period before tax 67,054

67,054 Profit before tax

Profit or loss from ordinary course of business (20,283)

(20,283) Income tax

Profit or loss for the period after tax 46,771

46,771 Profit after tax


Supervisory Agency

176

Statement of cash flows

The statement of cash flows has been prepared in accordance with the Ordinance on the structure and content of financial statements of insurance and reinsurance companies ("the Ordinance"), and its preparation is described in detail in the Instructions for completing financial statements of insurance and reinsurance companies, but its presentation differs from the statement of cash flows in the financial statements.

The main differences in presentation are described below:

1. Differences in the positions of increase or decrease in assets and liabilities in the statement of cash flows in the statutory financial statements and the statement of cash flows under the Ordinance arise due to differences in the relevant positions of assets and liabilities due to the different presentation in the financial statements compared to the Ordinance. These differences are presented in the adjustments of the statement of financial position (balance sheet).

2. Cash and cash equivalents at the beginning and end of the period presented in the statutory financial statements include deposits with contractual maturity up to 3 months as opposed to cash and cash equivalents at the beginning and end of the period presented in the statement of cash flows under the Ordinance.

Statement of changes in equity

In the statements under the Ordinance, profit/loss for the current year is presented in the eponymous column and in the subsequent period, upon adoption of the Decision of the General Assembly and the Supervisory Board, profit/loss is transferred through Other non-owner changes in equity to Retained earnings, while in the statutory financial statements it is presented under Retained earnings.


Supervisory Agency

177

Additional notes at the request of the Regulator

In accordance with the Ordinance on the structure and content of financial statements of insurance and reinsurance companies, additional notes are presented below on pages 177 to 181. Analysis by insurance type

The analysis of written premium and claims incurred by type of insurance is presented in the following tables. Gross written premiums have been adjusted by the net increase in value adjustment of premium receivables and corresponding write-offs.

Company 2015 Gross

written premium

Premiums ceded to

reinsurance



claims incurred


Accident insurance 130,925 (4) (38,276) 528

Health insurance 7,815 (329) (9,569) 937

Road motor vehicle insurance 257,752 (1,340) (204,991) 191

Railroad rolling stock insurance 6,526 (268) (481) -

Aircraft insurance 6,624 (7,243) (10,575) 8,948

Vessel insurance 89,988 (45,316) (58,297) 13,576

Insurance for goods in transit 24,918 (2,901) (13,417) (113)

Insurance against fire and natural disasters 204,030 (89,243) (46,318) 21,963

Other types of property insurance 313,840 (25,380) (202,755) 7,380

Motor liability 501,401 (9,495) (283,149) (3,146)

insurance

Aircraft liability 4,751 (3,094) (2,073) 446

insurance

Vesse liability insurance 26,062 (14,365) (9,418) 1,556

Other types of liability insurance 106,278 (39,652) (95,619) 27,293

Loan insurance/credit insurance 65,159 (3,732) (24,159) 464

Surety insurance 893 (24) (1,306)

Miscellaneous financial loss insurance 30,699 (14,891) (6,857) (308)

Travel insurance 10,277 (1,110) (3,440)

Total non-life insurance 1,787,938 (258,387) (1,010,700) 79,715

Life insurance 455,586 (280) (447,777) (49)

Annuity insurance 8,289

(9,797)

Additional insurance with life insurance 17,602 (117) (3,333)

Life and annuity insurance where the policyholder bears the investment risk

32,030 (31,866)

Total life insurance 513,507 (397) (492,773) (49)

2,301,445 (258,784) (1,503,473) 79,665


Supervisory Agency

178

Analysis by insurance type (continued)

Company 2014 Gross

written premiums

Premiums ceded to

reinsurance



claims incurred


Accident insurance 139,195 (8,091) (47,358) 2,981

Health insurance 9,132 - (18,736) 1

Road motor vehicle insurance 230,156 (233) (257,864) 153

Railroad rolling stock insurance 6,961 - (517) -

Aircraft insurance 7,617 (5,750) (6,887) 6,370

Vessel insurance 90,072 (59,634) (37,532) 16,067

Insurance for goods in transit 30,073 (2,689) (8,188) 75

Insurance against fire and natural disasters 199,495 (93,454) (98,773) 36,101

Other types of property insurance 292,313 (41,496) (249,332) 29,807

Motor liability 566,070 (11,694) (270,954) 17,742

insurance

Aircraft liability 5,051 (3,082) (244) 35

insurance

Veseel liablity insurance 23,732 (12,382) (18,675) 5,667

Other types of liability insurance 100,115 (47,625) (108,840) 33,816

Loan insurance/credit insurance 116,816 (6,001) (61,558) 16,631

Surety insurance 713 - (509) -

Miscellaneous financial loss insurance 37,002 (17,669) (10,252) 2,796

Travel insurance 8,200 - (2,009) -

Total non-life insurance 1,862,713 (309,800) (1,198,228) 168,242

Life insurance 346,072 (155) (366,557) 34

Annuity insurance 3,648 - (4,984) -

Additional insurance with life insurance 16,806 (92) (3,164) -


62 - (470) -

Total life insurance 366,589 (247) (375,176) 34

2,229,302 (310,047) (1,573,404) 168,276


Supervisory Agency

179

Breakdown of acquisition costs by operating segment

2015 2014

Comission Other

acquisition costs

Acquisition costs

Comission Other

acquisition costs

Acquisition costs


Non-life insurance

Accident insurance 17,537 7,573 25,110 18,460 8,068 26,527

Health insurance 908 544 1,453 1,118 539 1,657

Road motor vehicle insurance 31,484 13,497 44,982

32,813 14,288 47,101

Railroad rolling stock insurance 1,056 363 1,419

1,525 619 2,144

Aircraft insurance 546 403 949 185 114 299

Vesssel insurance 6,144 4,958 11,102 3,603 2,014 5,617

Insurance for goods in transit 2,385 1,644 4,029

1,581 783 2,364

Insurance against fire and natural disasters 29,665 13,016 42,681

28,670 12,316 40,987

Other types of property insurance 37,133 17,834 54,968

36,671 16,391 53,062

Motor liability insurance 51,308 34,870 86,179 62,108 31,841 93,950

Aircraft liablity insurance 281 262 543 38 43 81

Vessel liability insurance 996 1,270 2,266 369 280 649

Other types of liability insurance 10,090 5,352 15,442

9,711 4,432 14,143

Loan insurance/credit insurance 18,054 6,159 24,212

25,883 10,050 35,933

Surety insurance 53 40 93 29 14 43

Miscellaneous financial loss insurance 3,034 1,976 5,010

2,614 1,201 3,814

Travel insurance 2,299 617 2,913 2,403 1,079 3,482

Total non-life insurance 212,973 110,378 323,351 227,781 104,072 331,853

Life insurance

Life insurance 32,989 19,476 52,465 19,970 15,217 35,187

Annuity insurance 479 474 953 199 118 317

Additional insurance with life insurance

992 937 1,929 593 734 1,328


171 5 176 7 3 8

Total life insurance 34,631 20,892 55,523 20,769 16,072 36,840

TOTAL 247,604 131,270 378,874 248,550 120,144 368,694



180

Breakdown of administration costs (administrative expenses) by operating segments

2015 2014

Depreciation

Salaries, taxes and contributions on salaries

Other management

expenses

Management expenses

Depreciation

Salaries, taxes and

contributions on salaries

Other management

expenses

Management expenses

in HRK’000

in HRK’000


Non-life insurance

Accident insurance 2,688 14,753 10,654 28,095 2,997 17,288 25,733 46,017 Health insurance 196 1,075 764 2,035 314 1,912 2,887 5,113 Road motor vehicle insurance 4,487 24,627 20,463 49,577 4,601 26,613 41,983 73,197 Railroad rolling stock insurance 131 717 511 1,358 131 719 1,082 1,931 Aircraft insurance 145 796 571 1,512 86 647 1,023 1,757 Vessel insurance 1,763 9,676 6,894 18,333 1,835 10,754 15,587 28,176 Insurance for goods in transit 580 3,185 2,266 6,032 413 2,825 4,525 7,763 Insurance against fire and natural disasters 3,950 21,681 15,464 41,095 4,358 25,463 38,308 68,129 Other types of property insurance 5,793 31,795 22,731 60,319 7,079 41,466 61,355 109,901 Motor liability insurance 10,976 60,246 45,061 116,283 14,595 84,587 131,189 230,371 Aircraft liability insurance 94 518 369 981 59 424 688 1,171 Vessel liability insurance 457 2,509 1,804 4,770 377 2,259 3,257 5,892 Other types of liability insurance 1,915 10,512 7,525 19,952 2,153 12,458 18,461 33,071 Loan insurance/credit insurance 2,216 12,164 8,678 23,058 652 5,279 8,693 14,624 Surety insurance 15 80 60 154 7 45 64 117 Miscellaneous financial loss insurance 711 3,902 2,781 7,394 550 3,464 5,288 9,302 Travel insurance 156 856 631 1,664 174 997 1,531 2,702

Total non-life insurance 36,274 199,091 147,225 382,591 40,379 237,200 361,656 639,237

Life insurance

Life insurance 1,332 26,426 20,693 48,451 1,605 29,635 42,237 73,476 Annuity insurance 14 280 219 513 14 260 379 653 Additional insurance with life insurance 65 1,282 1,004 2,351 86 1,572 2,262 3,920 Life and annuity insurance where the policyholder bears the investment risk

- 6 5 10 - 4 6 10

Total life insurance 1,411 27,993 21,921 51,325 1,706 31,471 44,884 78,060

TOTAL 37,685 227,085 169,476 433,916 42,085 268,671 406,539 717,296


Supervisory Agency

181

Investment income and expenses by source of funding

2015 2014



Total investment income 119.047 236.971 356.018 120.638 212.855 333.493

Investment income from capital funds

4,768 29,532 34,300 2,208 37,371 39,579

Investment income from mathematical provisions

114,279 - 114,279 118,431 - 118,431

Investment income from remaining technical provisions

- 207,439 207,439 - 175,484 175,484

Total investment cost (27,209) (131,737) (158,946) (2,425) (308,576) (311,002)

Cost of investments from capital

(13,835) (51,353) (65,188) (1,134) (157,927) (159,061)

Costs of investment from mathematical reserves

(13,374) - (13,374) (1,291) - (1,291)

Cost of Investments from remaining technical provisions

- (80,384) (80,384) - (150,649) (150,649)

Documents

CROATIA osiguranje d.d. Annual report and financial statements for